10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended May 31, 2003

Commission file number:  33-83868

AMERICAN CRYSTAL SUGAR COMPANY
(Exact name of registrant as specified in its charter)
Minnesota	84-0004720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
101 North Third Street Moorhead, Minnesota  56560
(Address of principal executive offices)
Telephone Number (218) 236-4400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

YES         ý NO          o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class of Common Stock	Outstanding at July 8, 2003
$10 Par Value	2,995

AMERICAN CRYSTAL SUGAR COMPANY

FORM 10-Q

INDEX

PART I		FINANCIAL INFORMATION
	ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4.	DISCLOSURE CONTROLS
PART II		OTHER INFORMATION
	ITEM 1.	LEGAL PROCEEDINGS
	ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5.	OTHER INFORMATION
	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN CRYSTAL SUGAR COMPANY

Consolidated Balance Sheets

(Unaudited)

(Dollars in Thousands)

ASSETS

	May 31						August 31,
	2003			2002			2002*
Current Assets:
Cash and Cash Equivalents	$	998		$	21		$	22
Accounts Receivable:
Trade	51,025			60,315			60,812
Members	4,209			3,716			3,987
Other	5,952			839			1,465
Advances to Related Parties	15,450			15,786			11,336
Inventories	286,488			268,692			115,656
Prepaid Expenses	5,056			3,637			5,732
Total Current Assets	369,178			353,006			199,010
Property and Equipment:
Land	37,653			32,940			33,806
Buildings	88,652			85,348			86,647
Equipment	780,446			756,868			759,972
Construction-in-Progress	9,577			4,593			5,154
Less: Accumulated Depreciation	(584,482		)	(546,926		)	(546,960		)
Net Property and Equipment	331,846			332,823			338,619
Net Property and Equipment Held for Lease	173,004			—			—
Other Assets:
Investments in Marketing Cooperatives	2,966			2,294			2,064
Investments in ProGold Limited Liability Company	—			37,334			38,051
Investments in Crystech, LLC	1,269			1,416			1,403
Notes Receivable - Crystech, LLC	13,905			13,905			13,905
Other Assets	72,324			30,893			29,641
Total Other Assets	90,464			85,842			85,064
Total Assets	$	964,492		$	771,671		$	622,693

The Accompanying Notes are an Integral Part of These Financial Statements.

* Derived from Audited Financial Statements.

1

AMERICAN CRYSTAL SUGAR COMPANY

Consolidated Balance Sheets

(Unaudited)

(Dollars in Thousands)

LIABILITIES AND MEMBERS’ INVESTMENTS

	May 31						August 31,
	2003			2002			2002*
Current Liabilities:
Short-Term Debt	$	157,242		$	136,787		$	7,000
Current Maturities of Long-Term Debt	20,917			19,045			18,045
Accounts Payable	10,929			5,970			18,163
Advances Due to Related Parties	7,191			5,762			3,092
Accrued Continuing Costs (see note 3)	70,073			79,529			—
Other Current Liabilities	19,522			17,208			15,182
Amounts Due Growers	52,141			49,947			79,246
Total Current Liabilities	338,015			314,248			140,728
Long-Term Debt, Net of Current Maturities	282,240			182,372			182,371
Other Liabilities	41,475			30,058			30,927
Total Liabilities	661,730			526,678			354,026
Minority Interest in ProGold Limited Liability Company	42,962			—			—
Members’ Investments:
Preferred Stock	38,275			38,275			38,275
Common Stock	30			30			30
Additional Paid-in Capital	148,237			143,055			143,069
Unit Retains	108,010			100,145			124,101
Equity Retention	2,721			1,557			2,733
Accumulated Other Comprehensive Income/(Loss)	(1,317		)	(436		)	(1,317		)
Retained Earnings/(Deficit)	(36,156		)	(37,633		)	(38,224		)
Total Members’ Investments	259,800			244,993			268,667
Total Liabilities and Members’ Investments	$	964,492		$	771,671		$	622,693

The Accompanying Notes are an Integral Part of These Financial Statements.

* Derived from Audited Financial Statements.

2

AMERICAN CRYSTAL SUGAR COMPANY

Consolidated Statements of Operations

(Unaudited)

(Dollars in Thousands)

	For the Nine Months Ended May 31						For the Three Months Ended May 31
	2003			2002			2003			2002
Net Revenue	$	614,796		$	554,841		$	221,738		$	208,377
Cost of Product Sold	81,855			11,222			62,360			74,272
Gross Proceeds	532,941			543,619			159,378			134,105
Selling, General & Administrative Expenses	119,920			112,168			39,944			35,863
Accrued Continuing Costs (see note 3)	70,073			79,529			6,359			2,988
Operating Proceeds	342,948			351,922			113,075			95,254
Other Income/(Expense)
Interest Income	1,128			1,418			338			399
Interest Expense	(11,440		)	(11,214		)	(3,856		)	(3,129		)
Other, Net	2,210			2,437			731			1,549
Other (Expense)	(8,102		)	(7,359		)	(2,787		)	(1,181		)
Proceeds before Income Taxes	334,846			344,563			110,288			94,073
Minority Interest Share of Proceeds	(335		)	—			(335		)	—
Income Tax Expense	(8		)	(13		)	(14		)	(8		)
Net Proceeds Resulting from Member and Non-Member Business	$	334,503		$	344,550		$	109,939		$	94,065
Distribution of Net Proceeds:
Credited/(Charged) to Members’ Investments:
Non-Member Business Income/(Loss)	$	2,068		$	(142	)	$	144		$	669
Unit Retains Declared to Members	—			—			—			—
Equity Retention Declared to Members	—			—			—			—
Net Credit(Charge) to Members’ Investments	2,068			(142		)	144			669
Payments to/due Members for Sugarbeets, Net of Unit Retains Declared	332,435			322,172			109,795			81,546
Payment to/due Members for PIK Certificates, Net of Equity Retention Declared	—			22,520			—			11,850
Total	$	334,503		$	344,550		$	109,939		$	94,065

The Accompanying Notes are an Integral Part of These Financial Statements.

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American Crystal Sugar Company

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in Thousands)

	For the Nine Months Ended May 31
	2003			2002
Cash Provided By (Used In) Operations:
Net Proceeds Resulting from Member and Non-Member Business	$	334,503		$	344,550
Payments To/Due Members for Sugarbeets, Net of Unit Retains Declared	(332,435		)	(322,172		)
Payments To/Due Members for PIK Certificates, Net of Equity Retention Declared	—			(22,520		)
Add (Deduct) Non-Cash Items:
Depreciation and Amortization	42,596			38,661
(Income) from Equity Method Investees	(1,942		)	(2,397		)
Loss on the Disposition of Property and Equipment	312			208
Non-Cash Portion of Patronage Dividend from CoBank, ACB	(276		)	(437		)
Deferred Gain Recognition	(148		)	(148		)
Minority Interest in ProGold Limited Liability Company	335			—
Changes in Assets and Liabilities:
Receivables	7,137			7,315
Inventories	(169,925		)	(164,423		)
Prepaid Expenses	773			(879		)
Long-Term Prepaid Pension Expense	(12,175		)	(4,925		)
Advances To/Due to Related Parties	(14		)	1,332
Accounts Payable	(7,232		)	(13,805		)
Accrued Continuing Costs	70,073			79,529
Other Liabilities	7,062			2,038
Amounts Due Growers	(27,105		)	(32,819		)
Net Cash (Used In) Operations	(88,461		)	(90,892		)
Cash Provided By (Used In) Investing Activities:
Purchases of Property and Equipment	(17,201		)	(8,228		)
Purchases of Assets Held for Lease	(215		)	—
Acquisition from Imperial Sugar Company	(35,185		)	—
Proceeds from the Sale of Property and Equipment	130			177
Equity Refund from CoBank, ACB	1,749			341
Investments in Marketing Cooperatives	(666		)	—
Acquisition of Equity Interest in ProGold Limited Liability Company, Net of Cash Acquired	(9,766		)	—
Changes in Other Assets	43			(509		)
Net Cash (Used In) Investing Activities	(61,111		)	(8,219		)
Cash Provided By (Used In) Financing Activities:
Proceeds from (Payments) on Short-Term Debt, Net	150,242			122,824
Proceeds from Issuance of Long-Term Debt	31,000			—
Long-Term Debt Repayment	(19,759		)	(19,069		)
Proceeds from Issuance of Stock	5,168			5,813
Payment of Unit Retains & Equity Retention	(16,103		)	(16,338		)
Net Cash Provided by Financing Activities	150,548			93,230
Increase (Decrease) In Cash and Cash Equivalents	976			(5,881		)
Cash and Cash Equivalents, Beginning of Year	22			5,902
Cash and Cash Equivalents, End of Period	$	998		$	21

The Accompanying Notes are an Integral Part of These Financial Statements.

4

AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS AND THREE MONTHS ENDED MAY 31, 2003 AND 2002

Note 1:  Basis of Presentation

The unaudited consolidated financial statements of American Crystal Sugar Company (the Company) contained herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles.  However, in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

The Company’s unaudited consolidated financial statements are comprised of American Crystal Sugar Company, its wholly-owned subsidiary, Sidney Sugars Incorporated (SSI) and ProGold Limited Liability Company (ProGold), a limited liability company in which the company holds a 51 percent ownership interest.  On October 7, 2002, SSI, which was formed on September 17, 2002 under the laws of the state of Minnesota, acquired certain assets from Holly Sugar Corporation, a wholly-owned subsidiary of Imperial Sugar Company (Imperial).  On April 24, 2003, the Company acquired an additional five percent ownership interest in ProGold, effective May 1, 2003, resulting in an increase in the Company’s ownership in ProGold to 51 percent.  Due to the Company’s resulting controlling ownership interest in ProGold, effective May 1, 2003, the Company began to include ProGold in its consolidated financial statements.  The consolidated financial statements for prior periods have not been restated and therefore do not include consolidated data pertaining to ProGold prior to May 1, 2003.  All material inter-company transactions have been eliminated.

The operating results for the nine month and three month periods ended May 31, 2003 are not necessarily indicative of the results that may be expected for the year ended August 31, 2003.

The amount paid to shareholders for sugarbeets (member beet payment) depends on the future selling prices of sugar and agri-products as well as processing and other costs to be incurred during the remainder of the fiscal year associated with the 2002 Red River Valley sugarbeet crop (RRV crop). The amount paid to non-member growers for sugarbeets (non-member beet payment) depends on the future selling prices of sugar and the related selling expenses associated with the 2002 Sidney sugarbeet crop (Sidney crop).  For the purposes of this report, the amount of the beet payments, future revenues and costs have been estimated. Therefore, adjustments with respect to these estimates may be necessary in the future, as additional information becomes available.

These financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report for the year ended August 31, 2002.

Certain reclassifications have been made to the May 31, 2002 financial statements to conform with the May 31, 2003 presentation.

Note 2:  Inventories

The major components of inventories are as follows (In Thousands):

	5/31/03		5/31/02		8/31/02
Refined Sugar, Pulp, Molasses, Other Agri-Products and Sugar Beet Seed	$	268,283	$	250,673	$	97,693
Unprocessed Sugarbeets	—		—		—
Maintenance Parts & Supplies	18,205		18,019		17,963
Total Inventories	$	286,488	$	268,692	$	115,656

5

Sugar, pulp, molasses and other agri-products inventories are valued at estimated net realizable value.  Unprocessed sugarbeets are valued at the estimated gross beet payment. Maintenance parts & supplies and beet seed inventories are valued at the lower of average cost or market.

Note 3:  Accrued Continuing Costs

For interim reporting, the Net Proceeds from Member Business is based on (i) the forecasted member gross beet payment and the percentage of the tons of RRV crop processed to the total estimated tons of the RRV crop to process for a given crop year and (ii) on the forecasted gross PIK payment and the percentage of the hundredweight of sugar received to the total hundredweight of sugar to be received.  The Net Proceeds from the operations of SSI is based on the forecasted net income for the fiscal year and the percentage of the tons of Sidney crop processed to the total estimated tons of the Sidney crop to be processed for a given fiscal year.

Accrued continuing costs represent the difference between (i) the Net Proceeds as determined above and (ii) actual member business crop year revenues realized and expenses incurred through the end of the reporting period plus the SSI fiscal year revenues realized and expenses incurred through the end of the reporting period.  Accrued continuing costs are reflected in the Financial Statements as a cost on the Statements of Operations and as a current liability on the Balance Sheets.

Note 4:  Members’ Investments

	Par Value		Shares Authorized	Shares Issued & Outstanding
Preferred Stock:
July 8, 2003	$	76.77	600,000	498,570
May 31, 2003	$	76.77	600,000	498,570
August 31, 2002	$	76.77	600,000	498,570
May 31, 2002	$	76.77	600,000	498,570
Common Stock:
July 8, 2003	$	10.00	4,000	2,995
May 31, 2003	$	10.00	4,000	2,995
August 31, 2002	$	10.00	4,000	3,035
May 31, 2002	$	10.00	4,000	3,025

Note 5:  Interest Paid

Interest paid, net of amounts capitalized, was $10.3 million and $10.7 million for the nine months ended May 31, 2003 and 2002, respectively.

Note 6: Short-Term Debt

The Company has a seasonal line of credit with a consortium of lenders led by CoBank, ACB of $265 million and a line of credit with Wells Fargo Bank for $1 million, of which there is currently no debt outstanding. The Company’s commercial paper program has been increased from $150 million to provide short-term borrowings of up to $225 million of which approximately $157.2 million is currently outstanding.  Any borrowings under the commercial paper program will act to reduce the available credit under the CoBank, ACB seasonal line of credit by a commensurate amount. The acquisition from Imperial was initially financed utilizing available short-term debt.

As of May 31, 2003, the Company had outstanding commercial paper of $157.2million at an average interest rate of 1.54% and maturity dates between June 2, 2003 and July 31, 2003.  The Company had no outstanding short-term debt with CoBank, ACB as of May 31, 2003.

6

As of May 31, 2002, the Company had outstanding commercial paper of $136.8million at an average interest rate of 2.86% and maturity dates between June 18, 2002and August 23, 2002. The Company had no outstanding short-term debt with CoBank, ACB as of May 31, 2002.

Note 7: Sidney Sugars Incorporated

On October 7, 2002, the Company, through SSI, acquired three sugarbeet processing facilities and the related marketing allocations associated with such facilities from Imperial for a purchase price of approximately $35.2 million.

The facility located in Hereford, Texas was idle at the time of the acquisition and will remain idle for the foreseeable future.  The facility located in Torrington, Wyoming has been leased, on a long-term basis, to Western Sugar Cooperative, who will continue to operate the facility to process sugarbeets delivered by growers supplying the facility prior to the acquisition and from its own growers.  The lease payments due under the long-term lease are nominal.

SSI will operate the facility located at Sidney, Montana.  The campaign for the 2002 Sidney crop commenced on September 25, 2002 and was completed on February 28, 2003. A total of 863,000 tons of sugarbeets were harvested, with a total production of approximately2.5 million hundredweight of sugar produced from the 2002 Sidney crop. Approximately 127,000 tons of beets from the 2002 Sidney crop had been harvested prior to October 7, 2002. This portion of the crop and the resulting sugar produced from those beets remained the property of Imperial.

As part of the entire transaction with Imperial, the Company acquired the rights to marketing allocations equal to an estimated 4.8% of the total allocation for the domestic sugarbeet segment.  A portion of these marketing allocations will be used to market the sugar produced at the Sidney, Montana facility.  Any excess allocations will be available to the Company.  The sugar produced by SSI will be marketed through United Sugars Corporation while the agri-products produced will be marketed through Midwest Agri-Commodities Company.

Note 8: ProGold Limited Liability Company

On April 24, 2003, the Company acquired Minn-Dak Farmer Cooperative’s (Minn-Dak) five percent ownership interest in ProGold Limited Liability Company (ProGold) for $10.3 million, effective May 1, 2003.  This acquisition results in an increase in the Company’s ownership in ProGold to 51 percent, while Golden Growers Cooperative continues to own 49 percent.

Due to the Company’s resulting controlling ownership interest in ProGold, effective May 1, 2003, the Company began to include ProGold in its consolidated financial statements.

ProGold was formed in 1994 by American Crystal Sugar Company, Golden Growers Cooperative and Minn-Dak Farmers Cooperative to construct and operate a corn wet-milling plant for the production of high-fructose corn syrup sweetener.  In November 1997, ProGold entered into an agreement with Cargill, Incorporated (Cargill) to lease substantially all of its assets to Cargill.  Under the terms of the operating lease, Cargill manages all aspects of the operations of the ProGold corn wet-milling plant.

Note 9: Net Property and Equipment Held for Lease

ProGold owns a corn wet milling facility that it leases to Cargill, Incorporated under an operating lease which runs through December 31, 2007.

The Property and Equipment Held for Lease are stated at cost, net of accumulated depreciation. The components of Property and Equipment Held for Lease as of May 31, 2003 are shown below:

7

	(In Thousands)
Land and Land Improvements	$	7,762
Buildings	40,855
Equipment	197,828
Construction in Progress	339
Less Accumulated Depreciation	(73,780		)
Net Property and Equipment Held for Lease	$	173,004

Future minimum payments to be received under the lease are as follows:

Fiscal year ending August 31, (In Thousands)

2003	$	5,863
2004	23,452
2005	23,452
2006	23,452
2007	23,452
2008	8,093
	$	107,764

Note 10: Segment Reporting

The Company has identified two reportable segments: Sugar and Leasing.  The sugar segment is engaged primarily in the production and marketing of sugar from sugarbeets.  It also sells agri-products and sugarbeet seed.  The leasing segment is engaged in the leasing of a corn wet milling plant used in the production of high-fructose corn syrup sweetener.  The segments are managed separately.  There are no intersegment sales.  The leasing segment has a major customer, Cargill, who accounts for all of that segment’s revenue.

Summarized financial information concerning the Company’s reportable segments for the nine months and three months ended May 31, 2003 is shown below:

8

	For the Nine Months Ended May 31, 2003 (Dollars In Thousands)
	Sugar		Leasing		Eliminations			Consolidated
Net Revenue from External Customers	$	612,521	$	2,275	$	—		$	614,796
Gross Proceeds	531,662		1,279		—			532,941
Depreciation and Amortization	41,679		917		—			42,596
Interest Income	1,128		—		—			1,128
Interest Expense	10,852		588		—			11,440
Income from Equity Method Investees	2,291		—		(349		)	1,942
Other Income/(Expense), Net	2,559		—		(349		)	2,210
Net Proceeds	334,503		684		(684		)	334,503
Capital Expenditures	52,386		215		—			52,601

	For the Three Months Ended May 31, 2003 (Dollars In Thousands)
	Sugar		Leasing		Eliminations			Consolidated
Net Revenue from External Customers	$	219,463	$	2,275	$	—		$	221,738
Gross Proceeds	158,099		1,279		—			159,378
Depreciation and Amortization	12,683		917		—			13,600
Interest Income	338		—		—			338
Interest Expense	3,268		588		—			3,856
Income from Equity Method Investees	1,142		—		(349		)	793
Other Income/(Expense), Net	1,080		—		(349		)	731
Net Proceeds	109,939		684		(684		)	109,939
Capital Expenditures	6,609		215		—			6,824

	As of May 31, 2003 (Dollars In Thousands)
	Sugar		Leasing		Eliminations			Consolidated
Property and Equipment, Net	$	331,839	$	7	$	—		$	331,846
Assets Held for Lease, Net	—		173,004		—			173,004
Identifiable Assets	823,962		185,246		(44,716		)	964,492

Note 11: Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board has recently issued Interpretation No. 46 regarding the Consolidation of Variable Interest Entities. This interpretation becomes effective for the Company in the first quarter of fiscal 2004.  Management does not expect that the implementation of this interpretation will have a material effect on the Company’s financial statements.

The Financial Accounting Standards Board has also recently issued Statement No. 150 regarding Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This interpretation becomes effective for the Company in the first quarter of fiscal 2004. Management does not expect that the implementation of this interpretation will have a material effect on the Company’s financial statements.

Item 2.   Management’s Discussion and Analysis of Results of Operations and Financial Condition for the Nine Months and Three Months Ended May 31, 2003 and 2002

This report contains forward-looking statements that involve risks and uncertainties.  Such forward-looking statements include, among others, those statements including the words “expect”, “anticipate”, “believe”, “may” and similar expressions.  The Company’s actual results could differ

9

materially from those indicated.  Important factors that could cause or contribute to such differences include, without limitation, market factors, weather and general economic conditions, farm and trade policy, available quantity and quality of sugarbeets.  For a more complete discussion of “Important Factors”, please refer to the Company’s 2002 Form 10-K.

Comparison of the Nine Months Ended May 31, 2003 and 2002

Revenue for the nine months ended May 31, 2003, was $614.8 million, an increase of $60.0 million as compared to the same period last year.  Revenue from total sugar sales increased 8.8 percent reflecting a 5.6 percent increase in the hundredweight sold and a 3.0 percent increase in the average selling price per hundredweight.  Revenue from pulp sales increased 6.4 percent due to a 10.6 percent increase in the average selling price per ton partially offset by a 3.8 percent decrease in the volume of pulp sold.  Revenue from molasses sales increased 89.1 percent due to a 103.7 percent increase in the volume of molasses sold partially offset by a 7.2 percent decrease in the average selling price per ton.  Revenue from the sales of Concentrated Separated By-Product (CSB), a by-product of the molasses desugarization process, increased 3.8 percent due to an 11.0 percent increase in the average selling price per ton partially offset by a 6.5 percent decrease in the volume of CSB sold.  Rental revenue on the ProGold operating lease was $2.3 million.

Cost of product sold, for the nine months ended May 31, 2003, exclusive of payments for member sugarbeets, increased $70.6 million as compared to the same period last year.  The cost associated with the cost of non-member sugar beets (Sidney Crop) was $31.2 million for the nine months ended May 31, 2003.  Direct processing costs for sugar and pulp increased 21.4 percent. This was due to harvesting 17.8 percent more sugarbeets (9.2 percent of the increase was attributable to the Sidney Crop) and processing 16.4 percent more sugarbeets (10.2 percent of the increase was attributable to the Sidney crop).  Higher natural gas prices also added to this increase.  Fixed and committed expenses increased 7.5 percent reflecting higher purchased power costs, insurance costs, and costs related to the operations of SSI.  The change in product inventories impacted the cost of product sold favorably by $7.0 million primarily due to an increase in the net realizable value for sugar.  The cost associated with sugar purchased to meet customer needs was up $14.1 million due to a delay in the commencement of the 2002 RRV crop campaign.  The 2002 RRV crop campaign start-up was delayed because of adverse planting and growing conditions which slowed the maturity of the crop. As a result, additional sugar was required to be purchased to service customers during this delay. Costs related to ProGold were $1.0 million.

Selling, general and administrative expenses for the nine months ended May 31, 2003 increased $7.8 million from 2002.  Selling expenses increased $7.9 million primarily due to the increase in the volume of sugar sold along with increased freight costs.  General and Administrative expenses decreased $ .1 million due to general cost decreases.

During the nine months ended May 31, 2003, 100 percent of the 2002 RRV crop was processed resulting in the recognition of net proceeds from member business of $332.4 million.  This represented 100 percent of the $332.4 million projected member gross beet payment for the 2002 RRV crop.  The actual net proceeds from member business, for the nine months ended May 31, 2003, were $396.8 million.  During the nine months ended May 31, 2003, 100.0 percent of the 2002 Sidney crop was processed resulting in the recognition of net proceeds from SSI of $2.7 million.  This represented 100.0 percent of the $2.7 million projected SSI net income for fiscal 2003.  The actual net proceeds from SSI, for the nine months ended May 31, 2003, was $8.4 million.  The difference between the actual net proceeds from member business and SSI and the amounts recognized for the nine months ended May 31, 2003, resulted in the recognition of $70.1 million of accrued continuing costs.  In comparison, during the nine months ended May 31, 2002, 100 percent of the 2001 RRV crop was processed resulting in the recognition of net proceeds from member business of $322.2 million.  This represented 100 percent of the $322.2 million projected member gross beet payment for the 2001 RRV crop. In addition, $22.5 million, representing 100 percent of the $22.5 million projected gross PIK payment, had also been recognized as net proceeds from member business.  The actual net proceeds from member business, for the nine months ended May 31, 2002, were $424.2 million.  The difference between the actual net proceeds from member

10

business and the amounts recognized for the nine months ended May 31, 2002, resulted in the recognition of $79.5 million of accrued continuing costs.

Interest income for the nine months ended May 31, 2003 decreased slightly compared to the same period last year primarily due to a lower average balance of investments.

Interest expense increased from last year primarily due to the addition of $ .6 million of interest resulting from the consolidation of ProGold partially offset by lower average borrowing levels for long-term debt and lower average borrowing rates on short-term debt.

Non-member activities resulted in income of $2.1 million for the nine months ended May 31, 2003 compared to a loss of $ .1 million for the same period last year. The non-member income in fiscal 2003 is primarily the result of activities related to SSI.  The non-member loss in fiscal 2002 was primarily the result of activities related to the investment in ProGold Limited Liability Company.

Comparison of the Three Months Ended May 31, 2003 and 2002

Revenue for the three months ended May 31, 2003, was $221.7 million, an increase of $13.4 million as compared to the same period last year.  Revenue from total sugar sales increased 3.1 percent reflecting a 4.5 percent increase in the hundredweight sold partially offset by a 1.4 percent decrease in the average selling price per hundredweight.  Revenue from pulp sales decreased 27.6 percent due to a 33.9 percent decrease in the volume of pulp sold partially offset by a 9.6 percent increase in the average selling price per ton.  Revenue from molasses sales increased 196.5 percent due to a 240.0 percent increase in the volume of molasses sold partially offset by a 12.8 percent decrease in the average selling price per ton.  Revenue from the sales of Concentrated Separated By-Product (CSB), a by-product of the molasses desugarization process, decreased 4.6 percent due to a 14.6 percent decrease in the volume of CSB sold partially offset by an 11.7 percent increase in average selling price per ton.  Rental revenue on the ProGold operating lease was $2.3 million.

Cost of product sold, for the three months ended May 31, 2003, exclusive of payments for member sugarbeets, decreased $11.9 million as compared to the same period last year.  Direct processing costs for sugar and pulp increased 52.9 percent. This was due to processing 83.2 percent more sugarbeets due to the longer running RRV crop processing campaign this year resulting from the delay of the campaign start-up last fall and the increase in the tons of sugarbeets harvested.  Higher natural gas prices and beet transportation costs also added to the increase.  Fixed and committed expenses increased 7.3 percent reflecting higher purchased power costs, insurance costs and costs related to the operations of SSI.  The change in product inventories impacted the cost of product sold favorably by $33.4 million primarily due to the increased net realizable value for sugar partially offset by lower sugar inventory levels.  Costs related to ProGold were $1.0 million.

Selling, general and administrative expenses for the three months ended May 31, 2003 increased $4.1 million from 2002.  Selling expenses increased $4.3 million primarily due to the increase in the volume of products sold and higher freight and warehousing costs.  General and Administrative expenses decreased $ .2 million due to general cost decreases.

During the three months ended May 31, 2003, 33.0 percent of the 2002 RRV crop was processed resulting in the recognition of net proceeds from member business of $109.8 million.  This represented 33.0 percent of the $332.4 million projected member gross beet payment for the 2002 RRV crop.  The actual net proceeds from member business, for the three months ended May 31, 2003, were $120.6 million.  An increase of $ .1 million in the projected net income from SSI was recognized during the three months ended May 31, 2003.  SSI incurred $4.3 million of net costs for the three months ended May 31, 2003.  The difference between the actual net proceeds from member business and SSI and the amounts recognized for the three months ended May 31, 2003, resulted in the recognition of $6.4 million of accrued continuing costs.  In comparison, during the three months ended May 31, 2002, 25.3 percent of the 2001 RRV crop was processed resulting in the recognition of net proceeds from member business of $81.5 million.  This represented 25.3 percent of the $322.2 million projected member gross beet payment

11

for the 2001 RRV crop. In addition, $11.9 million, representing 52.4 percent of the $22.5 million projected gross PIK payment, had also been recognized as net proceeds from member business.  The actual net proceeds from member business, for the three months ended May 31, 2002, were $96.3 million.  The difference between the actual net proceeds from member business and the amounts recognized for the three months ended May 31, 2002, resulted in the recognition of $3.0 million of accrued continuing costs.

Interest income for the three months ended May 31, 2003 decreased marginally compared to the same period last year primarily due to a lower average balance of investments.

Interest expense increased $ .7 million for the three months ended May 31, 2003 as compared to the same period last year primarily due to the addition of $ .6 million of interest resulting from the consolidation of ProGold, higher average borrowing levels for short-term debt and higher average interest rates for long-term debt.

Non-member activities resulted in income of $ .1 million for the three months ended May 31, 2003 compared to income of $ .7 million for the same period last year. This non-member income in fiscal 2003 is primarily the result of activities related to SSI.  The non-member income in fiscal 2002 was the result of activities related to Midwest Agri-Commodities Company, partially offset by activities related to the investment in ProGold Limited Liability Company.

Environmental Matters

On May 21, 2003, SSI received an Enforcement Action for Air Quality Violation letter from the Montana Department of Environmental Quality for alleged violations of allowed particulate emissions at the Sidney, Montana facility. SSI is currently involved in negotiations with the Montana Department of Environmental Quality with the intent of concluding a stipulation agreement with regard to the alleged violation and the related penalties of approximately $84,000. Management believes it will negotiate a satisfactory resolution and that the outcome should not have a material adverse effect on SSI’s or the Company’s financial position.

Liquidity and Capital Resources

Under the Company’s Bylaws and Member Grower Contracts, payments for member delivered sugarbeets, the principal raw material used in producing the sugar and agri-products it sells, are subordinated to all member business expenses.  In addition, the beet payments made to member growers and non-member growers are paid in three payments over the course of a year, and the member payments are made net of any anticipated unit retain for the crop. These procedures have the effect of providing the Company with an additional source of short-term financing.  This member financing arrangement may result in an additional source of liquidity and reduced need for outside financing in comparison to a similar business operated on a non-cooperative basis.

Because sugar is sold throughout the year (while sugarbeets are processed primarily in the fall, winter and spring) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The majority of such financing has been provided by a consortium of lenders lead by CoBank, ACB. The Company has a long-term debt commitment with CoBank, ACB of$227.9 million, of which $185.8 million is currently outstanding.  In addition, the Company has long-term debt outstanding of $50 million from a private placement of Senior Notes that occurred in September of 1998; $19.3 million from a private placement of Senior Notes that occurred in January of 2003; $43.3 million from nine separate issuances of Pollution Control and Industrial Development Revenue Bonds and a term loan with Bank of North Dakota of $4.8 million.  The Company also has a seasonal line of credit with a consortium of lenders led by CoBank, ACB of $265 million, of which there is no current balance outstanding, and a line of credit with Wells Fargo Bank for $1 million. The Company’s commercial paper program has been increased from $150 million to provide short-term borrowings of up to $225 million of which approximately $157.2 million is currently outstanding.  Any borrowings under the commercial paper

12

program will act to reduce the available credit under the CoBank, ACB seasonal line of credit by a commensurate amount.

The changes that occurred in the Company’s financial statements from August 31, 2002 to May 31, 2003 were primarily due to normal business seasonality, the acquisition activities related to SSI and the consolidation impact of ProGold.  The first nine months of the Company’s fiscal year includes the completion of the sugarbeet harvest, the processing campaign, and the initial payments to growers for delivered sugarbeets.  The cash used in operations of $88.3 million and investing activities of $61.3 million was funded primarily through the cash provided by the net proceeds from short-term debt of $150.2 million, proceeds from long-term debt of $31.0 million, and proceeds from the installment sale of stock of $5.2 million. This was partially offset by the payment of unit retains of $16.1 million and long-term debt repayment of $19.8 million.

Working capital decreased $27.1 million from $58.3 million at the beginning of the year to $31.2 million as of May 31, 2003 primarily due to additional short-term debt, increases in payables and an increase in receivables partially offset by increased inventories and amounts due growers.  Working capital as of May 31, 2003 was $31.2 million, a decrease of $7.6 million when compared to $38.8 million of working capital as of May 31, 2002.

Capital expenditures for the Nine months ended May 31, 2003 were $52.6 million, which included $35.2 related to the acquisition activities of SSI.  Capital expenditures for the same period in 2002 were $8.2 million.  The Company had outstanding commitments totaling $10.0 million as of May 31, 2003 for equipment and construction contracts related to various capital projects.

The Company anticipates that the funds necessary for working capital requirements and future capital expenditures will be derived from operations, short-term borrowings, depreciation, unit retains and long-term borrowings.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument.  The value of a financial instrument may change as a result of changes in the interest rates, exchange rates, commodity prices, equity prices and other market changes.  Market risk is attributed to all market-risk sensitive financial instruments, including long term debt.

The Company does not believe that there is any material market risk exposure with respect to interest rates, exchange rates, commodity prices, equity prices and other market changes that would require disclosure under this item.

Item 4.   Controls and Procedures

The Company’s chief executive officer and chief financial officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934) as of May 31, 2003.  Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the chief executive officer and chief financial officer have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are reasonably adequate to ensure that they are provided with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.  There were no significant deficiencies or material weaknesses identified, and therefore no corrective actions were taken.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time and in the ordinary course of its business, the Company is named as a defendant in legal proceedings related to various issues, including worker’s compensation claims, tort claims and contractual disputes. The Company is currently involved in certain legal proceedings, which have arisen in the ordinary course of the Company’s business. The Company is also aware of certain other potential claims, which could result in the commencement of legal proceedings. The Company carries insurance, which provides protection against certain types of claims. With respect to current litigation and potential claims of which the Company is aware, the Company’s management believes that (i) the Company has insurance protection to cover all or a portion of any judgments which may be rendered against the Company with respect to certain claims or actions and (ii) any judgments which may be entered against the Company and which may exceed such insurance coverage or which may arise in actions involving potential liabilities not covered by insurance policies are not likely to have a material adverse effect upon the Company, or its assets or operations.

Item 2.  Changes in Securities and Use of Proceeds.

None

Item 3.  Default Upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information.

None.

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Item 6. Exhibits and Reports on Form 8-K

(a)Exhibits

Item No.		Method of Filing
3.1	Restated Articles of Incorporation of American Crystal Sugar Company	Incorporated by reference to Exhibit 3(i) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
3.2	Restated By-laws of American Crystal Sugar Company	Incorporated by reference to Exhibit 3(ii) from the Company’s Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
4.1	Restated Articles of Incorporation of American Crystal Sugar Company	See Exhibit 3.1
4.2	Restated By-laws of American Crystal Sugar Company	See Exhibit 3.2
10.1	Trademark License Agreement between Registrant and United Sugars Corporation, dated November 1, 1993	Incorporated by reference to Exhibit 10(l) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.2	Form of Operating Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(u) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.3	Form of Member Control Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(v) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.4	Administrative Services Agreement between Registrant and ProGold Limited Liability  Company	Incorporated by reference to Exhibit 10(w) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
+10.5	Coal Supply Agreement between Registrant and Spring Creek Coal Company, dated August 25, 1995	Incorporated by reference to Exhibit 10(y) from the Company’s Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.

15

+10.6	Coal Transportation Agreement between Registrant and Northern Coal Transportation Company, dated August 25, 1995	Incorporated by reference to Exhibit 10(z) from the Company’s Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
+10.7	Trademark License Agreement between Registrant and The Pillsbury Company, dated as of April 9, 1997	Incorporated by reference to Exhibit 10(dd) from the Company’s Registration Statement on Form S-1 (File No. 333-32251), declared effective October 24, 1997.
10.8	Pledge Agreement between Registrant and First Union Trust Company, NA	Incorporated by reference to Exhibit 10(ee) from the Company’s Annual Report on Form 10-K for the year ended August 31, 1998.
10.9	Indemnity Agreement between Registrant, Newcourt Capital USA Inc., Crystech, LLC and Crystech Senior Lender Trust	Incorporated by reference to Exhibit 10(ff) from the Company’s Annual Report on Form 10-K for the year ended August 31, 1998.
10.10	Tolling Services Agreement between Crystech, LLC and Registrant	Incorporated by reference to Exhibit 10(gg) from the Company’s Annual Report on Form 10-K for the year ended August 31, 1998.
10.11	Operations and Maintenance Agreement between Crystech, LLC and Registrant	Incorporated by reference to Exhibit 10(hh) from the Company’s Annual Report on Form 10-K for the year ended August 31, 1998.
+10.12	Limited Liability Company Agreement of Crystech, LLC	Incorporated by reference to Exhibit 10(ii) from the Company’s Annual Report on Form 10-K for the year ended August 31, 1998.
10.13	Master Agreement between the Registrant and Bakery, Confectionery, Tobacco Workers & Grain Millers AFL-CIO, CLC	Incorporated by reference to Exhibit 10.22 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
10.14	Registrant’s Senior Note Purchase Agreement	Incorporated by reference to Exhibit 10.24 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
10.15	Registrant’s  Senior Note Intercreditor and Collateral Agency Agreement	Incorporated by reference to Exhibit 10.25 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
10.16	Registrant’s Senior Note Restated Mortgage and Security Agreement	Incorporated by reference to Exhibit 10.26 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
10.17	Employment Agreement between the Registrant and James J. Horvath	Incorporated by reference to Exhibit 10.28 from the Company’s Annual Report on Form 10-K form the year ended August 31, 1999

16

10.18	Stipulation Agreement between Registrant and State of Minnesota Pollution Control Agency, dated April 4, 2000	Incorporated by reference to Exhibit 10.28 from the Company’s Form 10-Q for the quarter ended May 31, 2000
10.19	Board of Directors Deferred Compensation Plan, dated June 30, 1994	Incorporated by reference to Exhibit 10.29 from the Company’s Annual Report on Form 10K for the year ended August 31, 2000
10.20	Long Term Incentive Plan, dated June 23, 1999	Incorporated by reference to Exhibit 10.31 from the Company’s Annual Report on Form 10K for the year ended August 31, 2000
10.21	Addendum to Master Agreement between the Registrant and Bakery, Confectionery, Tobacco Workers & Grain Millers AFL-CIO, CLC dated July 10, 2001	Incorporated by reference to Exhibit 10.30 from the Company’s Annual Report on Form 10K for the year ended August 31, 2001
10.22	Uniform Member Sugar Marketing Agreement between the Registrant and United Sugars Corporation dated September 1, 2001.	Incorporated by reference to Exhibit 10.27 from the Company’s Form 10-Q for the quarter ended November 30, 2001
10.23	Uniform Member Marketing Agreement between the Registrant and Midwest Agri-Commodities Company dated September 1, 2001.	Incorporated by reference to Exhibit 10.28 from the Company’s Form 10-Q for the quarter ended November 30, 2001
10.24	Term and Seasonal Loan Agreements between the Registrant and CoBank, ACB dated March 27, 2002	Incorporated by reference to Exhibit 10.27 from the Company’s Form 10-Q for the quarter ended May 31, 2002
10.25	Retirement Plan A Restatement	Incorporated by reference to Exhibit 10.28 from the Company’s Annual Report on Form 10K for the year ended August 31, 2002
10.26	Retirement Plan B Restatement	Incorporated by reference to Exhibit 10.29 from the Company’s Annual Report on Form 10K for the year ended August 31, 2002
10.27	Amendments to Term and Seasonal Loan Agreements between the Registrant and CoBank, ACB dated November 6, 2002	Incorporated by reference to Exhibit 10.30 from the Company’s Form 10-Q for the quarter ended November 30, 2002
10.28	Registrant’s Senior Note Purchase Agreement dated January 15, 2003	Incorporated by reference to Exhibit 10.29 from the Company’s Form 10-Q for the quarter ended February 28, 2003
10.29	Growers’ Contract (5-year Agreement) for the crop years 2003 through 2007	Incorporated by reference to Exhibit 10.30 from the Company’s Form 10-Q for the quarter ended February 28, 2003
10.30	Growers’ Contract (Annual Contract) for crop year 2003.	Incorporated by reference to Exhibit 10.31 from the Company’s Form 10-Q for the quarter ended February 28, 2003
++10.31	Beet Loading and Hauling Agreement between the Registrant and Transystems LLC for the crop years 2003 through 2007	Filed herewith electronically
++10.32	2003 Sugarbeet Delivery Agreement between Sidney Sugars Incorporated and Growers	Filed herewith electronically

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21.1	List of Subsidiaries of the Registrant	Incorporated by reference to Exhibit 21.1 from the Company’s Annual Report on Form 10K for the year ended August 31, 2002
99.1	Section 1350 Certification of the Chief Executive Officer	Accompanying herewith electronically
99.2	Section 1350 Certification of the Chief Financial Officer	Accompanying herewith electronically

+Confidential treatment under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, has been granted with respect to designated portions of this document.

++Confidential treatment has been requested with respect to designated portions of this document.  Such portions have been omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

(b) Reports on Form 8-K

The Company filed the following Current Reports on Form 8-K during this quarter.

(i)Current Report on Form 8-K, dated March 26, 2003, under item 9, the Company stated that it had announced to its shareholders on March 26, 2003, that the projected gross beet payment for the 2002 Red River Valley crop is $38.00 per average ton of sugarbeets.

(ii)Current Report on Form 8-K, dated April 4, 2003, under item 9, the Company stated that it had announced at various meetings with shareholders that the imposition of sugar marketing allocations under the 2002 Farm Bill will likely result in significant sugarbeet acreage fluctuations from year to year for the Company’s shareholders.

(iii)Current Report on Form 8-K, dated April 24, 2003, under item 5, the Company announced to its shareholders on April 24, 2003, that the Company had acquired Minn-Dak Farmer Cooperative’s five percent ownership interest in ProGold Limited Liability Company (ProGold) for $10.3 million, effective May 1, 2003, resulting in an increase in the Company’s ownership in ProGold to 51 percent.

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		AMERICAN CRYSTAL SUGAR COMPANY
		(Registrant)
Date:	July 15, 2003		/s/ Brian Ingulsrud
			Brian Ingulsrud
			Corporate Controller,
			Chief Accounting Officer
			Duly Authorized Officer

18

CERTIFICATIONS

I, James J. Horvath, President and Chief Executive Officer of American Crystal Sugar Company, certify that:

1.I have reviewed this quarterly report on Form 10-Q of American Crystal Sugar Company (the registrant);

2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and

c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

6.The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

July 15, 2003

/s/ James J. Horvath

James J. Horvath

President and Chief Executive Officer

19

CERTIFICATIONS

I, Joseph J. Talley, Vice President-Finance and Chief Financial Officer of American Crystal Sugar Company, certify that:

1.I have reviewed this quarterly report on Form 10-Q of American Crystal Sugar Company (the registrant);

2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and

c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

6.The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

July 15, 2003

/s/ Joseph J. Talley

Joseph J. Talley

Vice President-Finance and Chief Financial Officer

20

EX-10.31

Exhibit 10.31

[Portions of this Exhibit have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Exhibit with all sections intact has been filed separately with the Securities and Exchange Commission.]

BEET LOADING AND HAULING AGREEMENT

THIS AGREEMENT is made as of April 28, 2003, by and between AMERICAN CRYSTAL SUGAR COMPANY, a Minnesota agricultural cooperative corporation, whose address is 101 North Third Street, Moorhead, Minnesota (hereinafter “ACSC”) and TRANSYSTEMS LLC, a Wyoming limited liability company, whose address is 511 Central Avenue West, Suite 2, Great Falls, Montana (hereinafter “Contractor”).

1.Purposes:  This Agreement shall cover:

(a)The loading of sugarbeets from storage piles into trucks by Contractor at ACSC’s outside sugarbeet receiving stations at the locations designated on Exhibit A hereto (the “Outside Receiving Stations”) for hauling by truck to ACSC’s sugarbeet factories at: Moorhead, Crookston, East Grand Forks, Minnesota; Hillsboro and Drayton, North Dakota; (collectively, the “Factories”);

(b)The hauling of sugarbeets by truck by Contractor from the Outside Receiving Stations to the wet hoppers at the Factories and the unloading thereof into the wet hoppers;

(c)The loading of sugarbeets from storage piles into trucks by Contractor at the receiving stations at the Factories (the “Factory Receiving Stations”), the hauling of such sugarbeets by truck to the wet hoppers at the Factories and the unloading thereof into the wet hoppers.  Outside Receiving Stations and Factory Receiving Stations may hereinafter be collectively referred to as “Receiving Stations;” and

(d)Teardown services, clean up, snow removal and other services as provided herein.

With all of such services as set forth above and more fully described in Sections 3, 4, 5 and 15 below collectively referred to as the “Transportation Services.”

2.Term:  This Agreement shall be effective as of the date hereof and shall be in effect for and during the sugarbeet processing campaigns with respect to the 2003 through 2007 sugarbeet crops (the “Term”), unless cancelled or terminated earlier as hereinafter provided.  Each sugarbeet processing campaign shall be referred to as the “Campaign Period” and each 12-month period commencing on September 1 and ending on August 31, shall be referred to as a “Contract Year.”

3.Loading:  During each Campaign Period, Contractor agrees to load into trucks of Contractor as directed by ACSC all sugarbeets in storage piles as designated by ACSC at the specified Outside Receiving Stations and shall load or replace in storage piles, all sugarbeets which may fall to the ground during loading.  As requested by ACSC, Contractor shall deliver designated mixes of loads of sugarbeets from Factory Receiving Stations and from Outside Receiving Stations to assist in maintaining consistent deliveries to the Factories.  Contractor will have at least twelve (12) loaders available at all times during the Term hereof to fulfill the loading requirements hereunder.  Such loaders shall be provided at the costs specified on Exhibit A.

1

In the event ACSC requests that Contractor operate additional loaders for sugarbeet blending purposes, ACSC will reimburse Contractor for the additional loaders at the rate set forth on Exhibit A.

4.Hauling:

(a)Responsibility of Contractor.  During each Campaign Period, Contractor agrees to haul by truck all sugarbeets loaded as described in Section 3 to the Factories designated by ACSC and to unload all of said sugarbeets, including those which may fall to the ground during transport and unloading, into the wet hopper on the grounds at the designated Factories.  Contractor shall assure a reliable supply of sugarbeets to each Factory such that there is no gap in deliveries to any Factory wet hopper of more that five minutes.

(b)Limitation of Contractor Responsibility.  Notwithstanding the provisions of paragraph (a) above, Contractor’s responsibility to haul sugarbeets from the Outside Receiving Stations shall be based on the capacity of the Equipment, with such limitation to be an average of 1,152,000 ton miles per day from such Outside Receiving Stations during each Campaign Period (the “Maximum Haul”).  In addition to the normal hauling rates set forth on Exhibits A and D, ACSC will be responsible for all incremental costs incurred to haul sugarbeets in excess of the Maximum Haul.  Contractor agrees to provide ACSC with such documentation as may be requested by ACSC to verify the incremental costs.  Subject to the preceding sentence, the rates set forth on Exhibits A and D shall apply to hauls in excess of the Maximum Haul.  The parties will cooperate during the Campaign Period to project the projected ton miles per day for the Campaign Period.  In the event the parties project that the Maximum Haul will be exceeded during any Campaign Period, the parties will mutually agree as to methods and costs for transporting the sugarbeets in excess of the Maximum Haul.  Should the parties be unable to reach such agreement, ACSC may make alternate arrangements and/or retain the services of a third party to transport sugarbeets in excess of the Maximum Haul, and Contractor shall not be entitled to any compensation with respect to the transportation of such sugarbeets.

5.Factory Yard Loading and Hauling:  During each Campaign Period, Contractor agrees to load into trucks all sugarbeets in storage piles as designated by ACSC at the specified Factory Receiving Stations and to transport such sugarbeets to, and unload the same into, the wet hoppers or Contractor’s Unloading Equipment at each Factory.  Contractor shall load or replace in storage piles, all sugarbeets that may fall to the ground during loading.

6.Tear Down Services:  At ACSC’s request and upon expiration of existing contracts between ACSC and certain third parties, Contractor agrees to assume the responsibility for performing the “tear down” of frozen sugarbeets at designated locations prior to loading.  Tear down services shall include the tear down of the sugarbeet piles with a backhoe, and the removal and stacking of ventilation tubes.  Frozen sugarbeets are located at the deep freeze piling sites set forth on Exhibit B, attached hereto (the “Deep Freeze Beets”).Notwithstanding commencement of the Term of this Agreement, tear down services shall commence on the following schedule to the extent requested in writing by ACSC:

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Location of Deep Freeze Storage Piles	Crop Year
Crookston District Piles	2003
Drayton District Piles	2003
East Grand Forks District Piles	2004
Hillsboro District Piles	2004
Moorhead District Piles	2005

Contractor shall provide all necessary equipment to perform tear down services on a schedule to be established by ACSC.  ACSC will provide necessary ripper claw buckets for the backhoes.  In the event Contractor performs services pursuant to this Section 6, such services shall be considered “Transportation Services” and Contractor shall be paid for such services in accordance with the terms of this Agreement, at a rate of XXXXX per hauled ton for tear down and XXXXX per tube for tube removal and stacking. [Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

7.Equipment:

(a)Provision of Equipment. Contractor shall supply the necessary trucks, equipment, fuel, material, labor, parts inventory and other items necessary to perform its obligations under this Agreement.  All equipment shall be of appropriate size, weight and capacity to properly accomplish the work without injury or damage to the personnel or property of ACSC.  Except as otherwise agreed upon by ACSC, Contractor shall furnish at least that equipment referenced in its bid proposal dated March 7, 2003 and reflected on Exhibit C, attached hereto (the “Equipment”).  Contractor shall develop and furnish ACSC with a plan to provide additional equipment to meet unexpected needs.  Contractor shall maintain all trucks and semi trailers free of dirt, debris and snow buildup in the truck or trailer box.  ACSC shall maintain or cause to be maintained adequate electrical service and lighting at each Outside Receiving Station and Factory Receiving Station.

(b)Unloading Equipment.  Contractor may install at its cost additional unloading equipment (the “Contractor’s Unloading Equipment”) at one or more of the Factories to enable Contractor to unload semi tractors equipped with combination trailers (pups).  Contractor shall be responsible for all costs related to the purchase, installation, maintenance, and operation of the Contractor’s Unloading Equipment.  The Contractor’s Unloading Equipment shall be installed pursuant to plans and at locations to be mutually agreed upon by the parties.  Contractor will be responsible for obtaining all permits and approvals from government authorities that are necessary for installation and operation of the Contractor’s Unloading Equipment.  Contractor will be responsible for staffing the Contractor’s Unloading Equipment.  Contractor will equip each Factory’s wet hopper operating station with controls that will enable ACSC personnel to transfer sugarbeets from Contractor’s surge tanks to the wet hopper.  ACSC will provide electricity to operate the Contractor’s Unloading Equipment at no additional charge to Contractor.  The Contractor’s Unloading Equipment shall be installed and operated so as not to interfere with the efficient operation of the Factory.  If in ACSC’s judgment the use of the Contractor’s Unloading Equipment is adversely affecting the operation of the Factory, upon notice by ACSC to Contractor, Contractor shall immediately modify the operation of such equipment to rectify the adverse effect on Factory operation, or discontinue the use of such equipment.  Contractor shall be responsible for the costs of any such modifications.  Except as otherwise specifically provided in Section 11 for the Drayton Factory, the installation, use, modification and or discontinued use of the Contractor’s Unloading Equipment shall not

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affect the rates charged for Transportation Services.  ACSC shall continue to make its existing unloading equipment available to Contractor at each Factory throughout the Term hereof.  Contractor shall retain ownership of, and insure the Contractor’s Unloading Equipment during the Term hereof, and shall remove such equipment from each Factory within sixty (60) days following termination of this Agreement.

8.Work Schedules:  Contractor shall coordinate its work with ACSC’s Management at the Factories and shall operate with sufficient equipment and labor, twenty-four hours per day, seven days per week, so as to keep the Factories supplied with sugarbeets at all times to permit optimum full-scale Factory operations.  Contractor shall deliver sufficient quantities of sugarbeets to permit each Factory to operate at its optimum daily slicing capacity, it being understood that, through the term of this Agreement, ACSC may, at any time, increase or decrease the slicing capacity at any of the Factories.  ACSC shall have complete discretion in determining which Receiving Stations or portions thereof shall be hauled at any given time and the times and rates at which sugarbeets covered by this Agreement shall be received at the wet hoppers at the Factories.  Notwithstanding the foregoing, at no time shall Contractor be required to haul 100% of the total slice from the Outside Receiving Stations to all Factories at the same time.  Each party shall keep the other constantly advised of estimated delivery schedules and Factory operations and shall, particularly, notify the other promptly of any matter arising which might result in any delay or change in the anticipated time or rate of receipt of sugarbeets covered by this Agreement.  Contractor shall furnish equipment as necessary to transport outside piles to the Factories before removing any sugarbeets from either ACSC’s above ground ventilation piles or ACSC’s deep freeze storage buildings.

9.Due Care:  Contractor shall use due care in its operations to ensure that there is minimal damage, injury, or loss of sugarbeets to be transported and unloaded under this Agreement and to ensure that no dirt, trash or debris is unloaded at the wet hopper at the Factories other than that already adhering to the sugarbeets when loaded into its trucks.  All frozen chunks of sugarbeets must be broken up prior to loading into trucks.

10.Default:  In the event Contractor fails to comply with any of the provisions of this Agreement or does not perform to ACSC’s good faith satisfaction, ACSC may: (a) immediately employ such equipment and labor or immediately contract with others as is necessary, in ACSC’s sole discretion, to complete or facilitate the work of Contractor; and/or (b) terminate this Agreement as to Contractor by 10 days notice in writing and employ such equipment and labor or contract with others as is necessary, in ACSC’s sole discretion, to complete the Transportation Services to be provided hereunder.  In either the event of (a) or (b) above, Contractor shall pay ACSC, upon demand, that portion of ACSC’s costs incurred for facilitating or completing the Transportation Services that are in excess of the payments that would have been made to Contractor for such work under this Agreement

11.Payments:  For the work hereunder, ACSC agrees to pay, and Contractor agrees to accept, the amounts set forth on Exhibit A hereto, subject to the annual wage adjustments provided in Section 17 of this Agreement.  In the event Contractor installs Contractor’s Unloading Equipment at the Drayton Factory, the rates set forth on Exhibit D hereto shall replace the rates on Exhibit A, with respect to the Drayton Factory only.  The installation of Contractor’s Unloading Equipment at the other Factories shall not affect the rates set forth on Exhibit A.  The rates on Exhibits A and D noted as “Fall Rates” shall apply during that portion of the Campaign Period that seasonal road weight restrictions are in effect.  The rates on Exhibits A and D noted as “Winter Rates” shall apply during that portion of the Campaign Period that seasonal weight

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restrictions are removed.  All rates are based on maximum legal weight limits on all haul roads involved.  Contractor agrees to furnish thirty (30) full (pup) trailers for operation of combination units having a gross vehicle weight of 105,500 pounds.  If such thirty units is not sufficient to fully service the Outside Receiving Stations designated by ACSC, Contractor shall use its other Equipment to meet the ACSC requirements and the rates for such Equipment set forth on Supplement #1 to Exhibit A shall apply.  If Contractor is required to reduce or is allowed to increase the normal truckload weights by reason of any governmental action, the rates expressed on Exhibits A and D will be adjusted accordingly.   For purposes of the preceding sentence, the gross vehicle weights set forth on Exhibit A shall be the “normal” truckload weights and shall serve as the basis for determining an increase or decrease in permitted truckload weights.  Payments shall be made by ACSC to Contractor on the basis of statements of weights on or before the 23^rd day of each month for all sugarbeets hauled from the 1^st to the 15^th of each month and on or before the 8^th day of each month for all sugarbeets hauled between the 16^th and the last day of the preceding month.  Settlement for each Outside Receiving Station shall be made upon the satisfactory completion of all hauling from that Outside Receiving Station

12.Fuel Provisions.  The rates established by Exhibits A and D are based on an estimated fuel cost of $1.05 per gallon delivered.  The price per gallon for fuel for each crop year will be set at a specified rate per gallon delivered by agreement between the parties on or before August 1^st of each of the crop years covered by this Agreement.  The rates set forth on Exhibits A and D will be adjusted based on the agreed upon fuel price for that Campaign Period.  Should the fuel price vary from that agreed upon, the difference will be paid by, or credited to ACSC at the end of the Campaign Period.  Contractor will furnish ACSC with copies of all fuel invoices for the purpose of the annual calculation.  ACSC reserves the right to purchase and supply fuel to Contractor at Contractor’s expense if ACSC can obtain fuel at a lower cost per gallon delivered than can Contractor.  For the purpose of the annual rate adjustment provided for herein, the cost of fuel to Contractor is agreed to be 15% of Contractor’s total costs of operation.  In the event of fuel allocations, Contractor shall furnish proof of the allocation and guarantee of sufficient fuel to accomplish its work hereunder during any such period of allocation.  Failure to provide such proof shall be a default hereunder.

13.Payment Disputes:  In the event of any disputes with respect to the determination of any amounts due hereunder, ACSC and Contractor, together with their representatives, shall promptly meet, confer and negotiate in good faith with a view to resolving any and all such disputes.  If such negotiations fail to resolve any disputes within fifteen (15) calendar days, the parties agree to submit the settlement of such dispute to binding arbitration pursuant to the commercial arbitration rules of the American Arbitration Association.  The arbitration shall be conducted in Minneapolis, Minnesota, U.S.A. Any award rendered shall be final and conclusive upon the parties. The parties shall request and the American Arbitration Association shall (i) appoint a single arbitrator who is familiar with the industry; (ii) direct the arbitrator to follow substantive rules of law and the federal rules of evidence, where and if applicable; (iii) allow the parties to conduct discovery pursuant to the rules then in effect under the federal rules of civil procedure (excluding confidential records that are not relevant to the issues being arbitrated) for a period not to exceed thirty (30) days; (iv) require any testimony to be transcribed; and (v) require any award or decision to be accompanied by findings of fact and a statement of reasons for the decision.  Each party shall bear its own costs and expenses, including reasonable attorney’s fees and expert’s fees, incurred in any dispute that is determined and/or settled by arbitration pursuant to this Section.  Except where clearly prevented by the area in dispute, both parties agree to continue performing their respective obligations under this Agreement (ex. the performance of the

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Transportation Services by Contractor and the payment of undisputed amounts by ACSC) while the dispute is being resolved.

14.Weight Determination: To calculate the weight to be used for purposes of the rates set forth on Exhibits A and D for the Outside Receiving Stations, 97% of the raw weight (2000 pounds per ton) of sugarbeets delivered by growers at that station, less the agreed upon raw weight of sugarbeets discarded by ACSC, shall be used.  To calculate the weight for purposes of the rates set forth on Exhibits A and D for the Factory Receiving Stations, 91.6% of the raw weight (2,000 pounds per ton) of sugarbeets delivered by growers to such piles, less the agreed upon raw weight of sugarbeets discarded by ACSC shall be used.  Raw weight shall mean the weight of purchased sugarbeets before the deduction for tare.  The record of weights of sugarbeets hauled under this Agreement will be kept by ACSC and statements of weights shall be furnished by ACSC to Contractor.

15.Other Responsibilities of Contractor:

(a)Clean Up.  Upon the completion of Contractor’s operations at any Receiving Station, Contractor shall level the piling site by backdragging with its loader and shall clean up the site and scale house, hauling away all trash and garbage.

(b)Snow Removal.  At the request of ACSC, Contractor shall haul snow and beet debris to separate staging areas as designated by ACSC.  Such services will be provided to ACSC by Contractor at a rate of $40.00 per hour for a truck and driver, and $48.00 per hour for a loader and operator, in each case to be billed to ACSC as provided in Section 11.

(c)Sugarbeet Disposal.  At the request of ACSC, Contractor shall remove and dispose of any sugarbeets that it does not deliver to a Factory for processing to areas designated by ACSC.  Such removal and disposal shall be accomplished in accordance with the applicable state and federal laws and environmental regulations.  Contractor’s obligations are limited to the loading and hauling (in Contractor’s Equipment) of such sugarbeets to sites designated by ACSC.  Contractor will unload such sugarbeets at a single site for each load and will not be responsible for spreading sugarbeets at disposal sites.  Such removal and disposal services will be provided to ACSC by Contractor at a rate of $40.00 per hour for a truck and driver, and $48.00 per hour for a loader and operator, in each case to be billed to ACSC as provided in Section 11.  This paragraph does not apply with respect to sugarbeets left at a location at the request of ACSC due to spoilage, excess snow, or other factors.

(d)Portable Toilets.  Contractor shall furnish a portable toilet at all Outside Receiving Stations while sugarbeets are being hauled from that Station.

16.Compliance With Laws:  Contractor shall obtain any necessary permits, licenses or certifications and shall comply with all applicable laws, ordinances, rules and regulations, and specifically, without limiting the generality of the foregoing, with applicable Worker’s Compensation laws and Unemployment Compensation laws, the Federal Insurance Contributions Act and Federal Unemployment Tax Act, federal and state withholding tax and federal and state labor laws and other laws affecting employers and employees with respect to all employees of Contractor and subcontractors and such subcontractors’ employees and shall furnish evidence of such compliance to ACSC upon request.  Contractor shall post appropriate highway warning

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signs at piling sites when operating and shall keep local, state, county and township officials advised should its activities create hazardous road conditions.  Contractor shall comply with all Federal and State environmental laws and requirements for proper disposal of all waste material including but not limited to tires, waste oil (including grease rags, oil filters), tires and batteries.

17.Wage Requirement:

(a)It is understood and agreed that ACSC is subject to a collective bargaining agreement with the Bakery, Confectionery, Tobacco Workers and Grain Millers AFL-CIO (the “Collective Bargaining Agreement”) which provides that ACSC will obligate third parties to pay certain minimum wages to employees moving sugarbeets within the Factory yard.  Contractor shall compensate its affected employees in accord with this requirement, including wage adjustments as provided in the Collective Bargaining Agreement.  The applicable minimum as of the date of this Agreement is XXXXXX per hour.  The rate for Factory yard loading and hauling expressed on Exhibit A will be adjusted based on wage increases applied only to Contractor’s employees specifically affected by the Collective Bargaining Agreement, but only on a straight time basis.  Contractor will provide ACSC with the information relative to the employees affected sufficient to enable ACSC to verify the rate adjustment.  [Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

(b)The rates set forth on Exhibits A and D shall be subject to annual adjustment to reflect wage increases for each of the Campaign Periods during the Term.  For purposes of this adjustment, wages shall be deemed to be XXXX% of the Contractor’s total rate provided in Exhibits A and D.  Accordingly XXXXX% of each rate bid shall be adjusted annually by the percentage of ACSC’s average annual wage rate adjustment effective as of August 1 of the preceding year under the Collective Bargaining Agreement.  (For example, if a rate is bid at $XXXXXXper ton and ACSC’s applicable average wage rate adjustment effective August 1, 2003, is a XXX% increase, the rate for 2004 crop year operations will be XXXXXX.) [Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

18.Independent Contractor Status:  It is expressly understood and agreed that Contractor, in making and entering into this Agreement and in carrying out the same, is acting and operating as an independent contractor and is not in any sense an employee, servant, agent, partner or joint venturer of ACSC and is responsible for directing, hiring, paying and discharging its employees.

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19.Insurance and Indemnification:

(a)Contract must provide and maintain the following insurance coverage:

(1)Workers Compensation Insurance as required by statute and Employers Liability Insurance for claims arising for bodily injury not covered by statute, in the minimum limit required by applicable state law or $500,000 per employee (whichever is less).

(2)Comprehensive General Liability Insurance with limits of not less than $1,000,000 combined single limit and $2,000,000 general aggregate for personal injury (including death) and property damage.  Insurance shall not contain any endorsement or provisions which limit or restrict coverage for contractual liability.

(3)Automobile Liability insurance with limits of not less than $1,000,000 combined single limit or $1,000,000 bodily injury and $1,000,000 property damage, all per accident and irrespective of whether vehicles are owned, hired or non-owned.

(4)Umbrella/Excess Liability with limits of not less than $10,000,000 per occurrence and annual aggregate limit, but excluding Workers Compensation Insurance as provided for above.

(5)All risk property coverage with respect to the Contractor’s Unloading Equipment in an amount deemed reasonable by Contractor.

Contractor’s deductibles shall not exceed $250,000 per occurrence on any of the policies of insurance.  Contractor shall provide ACSC with insurance certificates providing evidence of proper coverage before the start of work.  Contractor must provide waivers of subrogation from each insurer.

(b)Contractor will indemnify, defend and hold harmless ACSC and its subsidiaries, officers, employees, agents, successors, assigns, from and against any loss, property loss, liability, claim, demand, suit, action, fine, penalty, cost and expense of any nature whatsoever including but not limited to reasonable attorneys’ fees, expenses and court costs, incurred by ACSC or its subsidiaries, officers, employees, agents, successors, assigns as a result of the negligent or intentional acts of Contractor in connection with its performance under this Agreement.

(c)ACSC will indemnify, defend and hold harmless Contractor and its subsidiaries, officers, employees, agents, successors, assigns, from and against any loss, property loss, liability, claim, demand, suit, action, fine, penalty, cost and expense of any nature whatsoever including but not limited to reasonable attorneys’ fees, expenses and court costs, incurred by Contractor or its subsidiaries, officers, employees, agents, successors, assigns as a result of the negligent or intentional acts of ACSC in connection with its performance under this Agreement.

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20.No Guarantee by ACSC:  ACSC will exercise diligence to see that there is an ample supply of sugarbeets to permit efficient operation hereunder.  However, it is expressly understood and agreed that ACSC shall not be liable for a reduction in volume of its operations or those of Contractor caused by strikes, lock outs, shortage of materials, a reduction in the supply of sugarbeets resulting from decisions by growers to deliver from farm fields to Factory sites or from adverse weather conditions, or due to the physical condition of sugarbeets making it impossible to store them, or caused by a reduction in the Factory slice or caused by any other matter, any of which may prevent, in whole or in part, any operations hereunder or maximum or optimum operations.

21.Sale of Sugarbeets to Third Parties:  ACSC may at any time sell its sugarbeets to third parties.  In the event of such a sale Contractor shall be compensated for its loss of revenue resulting from the sale of sugarbeets.  Compensation shall be determined by multiplying the number of tons of sugarbeets that would have been hauled but for the sale, by Contractor’s rate which would have applied for transporting those sugarbeets to the nearest of ACSC’s Factories.  The product of that calculation shall be multiplied by .30 to determine the amount of the payment to be made by ACSC to the Contractor.  In the event ACSC discards sugarbeets, Contractor shall not be entitled to compensation for loss of revenue from discarded sugarbeets.

22.Liquidated Damages:

(a)Premature Use of Deep Freeze Sugarbeets.  ACSC and Contractor intend that sugarbeets stored in ventilated outside piles and in buildings (“Deep Freeze Sugarbeets”) not be processed until non-deep freeze sugarbeets have been processed.  In the event deep freeze sugarbeets are processed because Contractor fails to deliver sufficient quantities of non-deep freeze sugarbeets liquidated damages may apply.  The amount of the liquidated damages is $3.00 per ton of Deep Freeze Sugarbeets, applied to all tons of Deep Freeze Sugarbeets transported prior to completion of transporting non- Deep Freeze Sugarbeets.  In the event of severe weather conditions, ACSC may, in its discretion, excuse the obligation to pay damages under this paragraph.  Deep Freeze Sugarbeets transported by Contractor at the request of ACSC for reasons unrelated to Contractor’s failure to deliver sufficient quantities of non-Deep Freeze Sugarbeets are not subject to the liquidated damage provisions of this paragraph.

(b)Supply of Sugarbeets.  Should Contractor fail to furnish a steady supply of sugarbeets at all times to permit optimum full-scale Factory operations as required hereunder, Contractor will pay to ACSC, as liquidated damages and not a penalty, the sum of Five Thousand Dollars ($5,000.00) per hour of Factory down time, pro-rated on 15 minute increments, for each Factory so affected.  The parties agree that in the event Contractor fails to supply a steady supply of sugarbeets, actual damages to ACSC would be difficult or impossible to measure, and further that such hourly sum represents a reasonable estimate of ACSC’s likely actual damages in such event.  In the event of severe weather conditions, ACSC may, in its discretion, excuse the first fifteen minutes of down time.

23.Change of Receiving Stations or Closing of Factories:  ACSC reserves the right, in its sole discretion, to close and abandon operations or reduce operations at any Factory and/or Outside Receiving Station and to move and/or establish new, Outside Receiving Stations.  ACSC shall not be liable to Contractor for a reduction in Contractor’s revenue by the exercise of any of the rights so reserved to ACSC.  In the event the Company closes an Outside Receiving Station, Contractor shall not be entitled to compensation or damages for the closing of the Stations.  In the event the Company opens a new Outside Receiving Station, Contractor and

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Company, will negotiate the freight rate or rates from that Station to the appropriate Factory or Factories and Exhibit A will be revised accordingly.

24.Termination:  This Agreement shall terminate at the end of the Term or may be terminated earlier by written notice as follows:

(a)By the nonbreaching party if the other party fails to perform any obligation imposed on it by this Agreement and fails to cure such breach within ten (10) days following receipt of written notice of the existence of such a breach; or

(b)Immediately by either party in the event the other party is declared insolvent or bankrupt or makes an assignment or other arrangement for benefit of creditors.

Upon the completion of any notice and cure period required under this Section, this Agreement shall be terminated (except for any on-going obligation arising hereunder) and such date shall be deemed the “Termination Date.”

25.Factory Shops:  ACSC shall provide Contractor with use of shops at each Factory for purposes of Equipment service and related activities at a cost of $50,000 per year to be paid by Contractor.  The shops shall be provided pursuant to the terms of a lease agreement to be mutually agreed upon by the parties.

26.Miscellaneous Provisions:

(a)All notices, requests and demands given to or made upon the parties hereto shall be in writing and be delivered or mailed by United States Certified Mail Postage Prepaid, return receipt requested, to the following addresses:

If to ACSC:	American Crystal Sugar Company
	101 North Third Street
	Moorhead, Minnesota 56560
	Attention: Ag Operations Manager
With a Copy to:	Oppenheimer, Wolff & Donnelly, LLP
	Plaza VII
	45 South Seventh Street, Suite 3300
	Minneapolis, Minnesota 55402
	Attention:  Daniel C. Mott
If to Contractor:	Transystems LLC
	511 Central Avenue West, Suite 2
	Great Falls, Montana 59404-2848
	Attention: President

Either party may, by notice hereunder to the other party, designate a change of address.

(b)This Agreement shall be binding upon and insure to the benefit of the parties hereto and their respective successors and assigns, provided that this Agreement shall not be assigned by Contractor without the prior written consent of ACSC.

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(c)This Agreement shall have been deemed to be made under the laws of the State of Minnesota and for all purposes shall be construed in accordance with and governed by the laws of the State of Minnesota.  Any litigation arising under this Agreement shall be venued in the Courts of the State of Minnesota.

(d)No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law.

(e)This Agreement constitutes the sole agreement between the parties with respect to the subject hereof, and there are no agreements or understandings with respect to such matters other than as set forth herein and therein.

(f)Each party warrants that it has full power and authority to enter into this Agreement and the entering into this Agreement will not constitute a default with respect to any other agreement by which it is bound or to which it is subject.

(g)Time is of the essence with regard to the performance of this Agreement.

(h)This Agreement may not be assigned by either party (either directly or by operation of law through merger, consolidation, etc.) without the prior written consent of the other party.  This Agreement shall be binding on the successor and permitted assigns of the parties.

(i)ACSC and Contractor agree to enter into an agreement on substantially the same term as this Agreement with respect to the transport of sugarbeets at the Sidney, Montana sugarbeet factory that is owned by Sidney Sugars Incorporated, a subsidiary of ACSC.

(j)Each party shall designate an individual representative to act of behalf of such party during the Term of this Agreement (the “Designated Representative”).  The Designated Representative shall have the authority to represent the party in all matters related to the administration of this Agreement.  The initial Designated Representatives shall be as follows:

Contractor:Dan Rice

ACSC:Neil Juhnke

Either party may change their Designated Representative by providing written notice of the change to the other party.

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IN WITNESS WHEREOF, the parties have executed this Agreement in their corporate names by proper corporate officers and affix their corporate seals as to the day and year above stated.

AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ David Berg
Its:	Vice President Agriculture
TRANSYSTEMS LLC
By:	/s/ Scott Lind
Its:	President

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FALL RATES EXHIBIT A

RFQ FORM

FREIGHT FROM RECEIVING STATION TO FACTORY

American Crystal Sugar Company

As a Rate Per Ton for Delivery To (fill in white area only):

Station Moorhead Hillsboro Crookston E.G.F. Drayton

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

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RFQ FORM

FREIGHT FROM RECEIVING STATION TO FACTORY

American Crystal Sugar Company

Rate per ton mile for hauls other than those specified will be negotiated.

Load and haul factory yard per ton.	XXXXXX
Load outside stations per ton	XXXXXX
If an excess of twelve (12) loaders used simultaneously at request of ACS, the additional rate per ton is	XXXXXX
Loader moves	XXXXXX
Hourly loader rate	XXXXXX
Percent of Fuel to Total Cost	XXXXXX
Percent of Labor to Total Cost	XXXXXX
Alternate pricing for al ACSC sites:
Teardown deep freeze and remove vent tubes	XXXXXX
Haul and stack deep freeze vent tubes	XXXXXX

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

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FALL GVW’S

RFQ FORM

FREIGHT FROM RECEIVING STATION TO FACTORY

American Crystal Sugar Company

Station Moorhead Hillsboro Crookston E.G.F. Drayton

Note:  The first figure in the cells indicates the number of axles and the second series of numbers is the maximum GVW for that number of axles.  This information is for the exclusive use of ACS and Transystems.

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

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WINTER RATES EXHIBIT A

RFQ FORM

FREIGHT FROM RECEIVING STATION TO FACTORY

American Crystal Sugar Company

As a Rate Per Ton for Delivery To (fill in white area only):

Station Moorhead Hillsboro Crookston E.G.F. Drayton

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

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WINTER GVW’S

RFQ FORM

FREIGHT FROM RECEIVING STATION TO FACTORY

American Crystal Sugar Company

Station Moorhead Hillsboro Crookston E.G.F. Drayton

Note:  The first figure in the cells indicates the number of axles and the second series of numbers is the maximum GVW for that number of axles.  This information is for the exclusive use of ACS and Transystems.

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

17

FALL RATES SUPPLEMENT #1

RATES FOR FIVE AXLE – DRAYTON & HILLSBORO

American Crystal Sugar Company

As a Supplemental Rate Per Ton for Delivery To:

Station Moorhead Hillsboro Crookston E.G.F. Drayton

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

18

FALL GVW’S

RATES FOR FIVE AXLE – DRAYTON & HILLSBORO

American Crystal Sugar Company
As a Supplemental Rate Per Ton for Delivery To:

Station Moorhead Hillsboro Crookston E.G.F. Drayton

Note:  The first figure in the cells indicates the number of axles and the second series of numbers is the maximum GVW for that number of axles.  This information is for the exclusive use of ACS and Transystems.

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

19

WINTER RATES SUPPLEMENT #1

RATES FOR FIVE AXLE – DRAYTON & HILLSBORO

American Crystal Sugar Company

As a Supplemental Rate Per Ton for Delivery To:

Station Moorhead Hillsboro Crookston E.G.F. Drayton

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

20

WINTER GVW’S

RATES FOR FIVE AXLE – DRAYTON & HILLSBORO

American Crystal Sugar Company
As a Supplemental Rate Per Ton for Delivery To:

Station Moorhead Hillsboro Crookston E.G.F. Drayton

Note:  The first figure in the cells indicates the number of axles and the second series of numbers is the maximum GVW for that number of axles.  This information is for the exclusive use of ACS and Transystems.

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

21

EXHIBIT B

DEEP FREEZE STORAGE CAPACITIES - NET TONS

Factory and Out-station	Sheds	Open Storage	Total
Moorhead Yard	100,000	160,000	260,000
Felton		220,000	220,000
Amenia		75,000	75,000
Hillsboro Yard	125,000	130,000	255,000
Reynolds		330,000	330,000
Crookston Yard	100,000	285,000	385,000
Warren		100,000	100,000
EGF Yard	175,000	261,000	436,000
Ardoch		167,000	167,000
Alvarado		142,000	142,000
Drayton Yard	175,000	140,000	315,000
McArthur		91,000	91,000
Grafton		91,000	91,000
RRV Total	675,000	2,192,000	2,867,000

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EXHIBIT C

EQUIPMENT PROPOSED

Transportation Equipment
A.	Tractors	96	2004 Freightliner “Columbia” model.  Equipped with Mercedes Benz 12 liter 350 hp engines.
B	Trailers	96	Semi trailers. Combination of current and new East all-aluminum-flat decks.  The cages are Transystems’ proprietary design.
C.	Full (pup) Trailers	30	New East all-aluminum-flat decks.  The cages are Transystems’ proprietary design.
Loading, Tear Down and Supplemental Unloading Equipment
A.	Wheel Loaders	17	Combination of current and new Komatsu WA-450 and WA-500 wheel loaders with beet buckets.  (17 units total)
B.	Backhoes		Combination of Komatsu PC300LC (primary tool) and PC220LC as standby tools.  Each factory shall have a primary tool and a standby tool.
C.	Contractor’s Unloading Equipment		Three 85’ Transystems proprietary design tippers.  Three 260 cubic yard and two 400 cubic yard surge hoppers.  These will provide supplemental unloading capacity and will feed existing ACSC wet hoppers.  ACSC would provide access to its two existing portable skips.
			Transystems’ proposal includes additional unloading equipment at each factory.
			The Hillsboro, Drayton, and East Grand Forks factories each would receive an additional portable tipper and unloading conveyors.  The Hillsboro and Drayton tippers would be designed to accommodate semi-pup side dump units.
			The existing ACSC portable skips would be used at Crookston and Moorhead.
			All locations would receive additional hoppers that would allow the temporary storage of 250 to 500 tons of beets.
Loader Fuel Trailers
A.	Loader Fuel Trailers	15	(250 gallons US) with portable toilets

23

FALL RATES EXHIBIT D

FIVE & SEVEN AXLE DRAYTON RATES

American Crystal Sugar Company

As a Rate Per Ton for Delivery To (fill in white area only):

Station Moorhead Hillsboro Crookston E.G.F. Drayton

Note:  The first figure in the cells indicates the number of axles and the second series of numbers is the maximum GVW for that number of axles.  This information is for the exclusive use of ACS and Transystems

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

24

WINTERRATES

FIVE & SEVEN AXLE DRAYTON RATES

American Crystal Sugar Company
As a Rate Per Ton for Delivery To (fill in white area only):

Station Moorhead Hillsboro Crookston E.G.F. Drayton

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

25

WINTER GVW’S

FIVE & SEVEN AXLE DRAYTON RATES

American Crystal Sugar Company

As a Rate Per Ton for Delivery To (fill in white area only):

Station Moorhead Hillsboro Crookston E.G.F. Drayton

Note:  The first figure in the cells indicates the number of axles and the second series of numbers is the maximum GVW for that number of axles.  This information is for the exclusive use of ACS and Transystems

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

26

EX-10.32

Exhibit 10.32

[Portions of this Exhibit have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Exhibit with all sections intact has been filed separately with the Securities and Exchange Commission.]

FORM OF 2003 SUGARBEET DELIVERY AGREEMENT

Federal ID No.	Agreement No.
	Date:                                                          , 2003

SIDNEY SUGARS INCORPORATED (“SSI”) and

(“Grower”),

[a corporation, a partnership, an individual]*, whose address is

                                                                                                    , State of

hereby agree as follows:

1.             Purchase and Sale.  Grower shall grow and shall deliver and sell to SSI during the 2003-crop season, and SSI shall purchase from Grower, the sugarbeets as described on the attached Addendum(s) in accordance with the terms of this Agreement (this Agreement and such Addendum(s) together with the Exhibits attached hereto being collectively referred to herein as the Agreement).  SSI shall not be obligated to purchase, and Grower agrees to destroy prior to August 15, 2003, sugarbeets from all acres planted in excess of that set forth on the Addendum(s) attached hereto.  SSI hereby reserves the right to prorate deliveries to be made under this Agreement.  Any such proration shall be established by SSI after a determination by SSI that it may not be able to economically process the entire crop for any reason, including but not limited to, government imposed marketing allocations and for a larger than anticipated crop yield.  A proration shall be communicated to, and applied against, all growers of SSI on a uniform and equitable basis.  Title and risk of loss for sugarbeets purchased hereunder shall pass from Grower to SSI at the time the sugarbeets are placed on the piler belt.

2.             Agricultural Practices.  The sugarbeets shall be planted not later than June 1, 2003 unless a later date is approved in advance in writing by SSI.  Grower shall not plant sugarbeets in the same field in consecutive years unless approved in advance in writing by SSI.  Grower shall not apply nitrogen fertilizer to the sugarbeets after July 1, 2003 unless approved in advance in writing by SSI.  Grower shall not irrigate the sugarbeets within the 20-day period immediately prior to the date that harvest and delivery of the sugarbeets are scheduled to commence unless approved in advance in writing by SSI.  EXCEPT UNDER UNAVOIDABLE EMERGENCY CONDITIONS, GROWER SHALL REMOVE THE SUGARBEET FOLIAGE FROM THE CROP ONLY ON THE DAY ON WHICH SUGARBEETS ARE HARVESTED AND SHALL PROTECT THE SUGARBEETS FROM SUN AND FREEZING TEMPERATURES  AFTER REMOVAL FROM THE GROUND.  Except as expressly set forth in this Agreement, Grower is not obligated to adopt or conform to agricultural practices recommended by SSI or its employees.  In no event shall SSI be liable for any failure or partial failure of Grower’s sugarbeet crop or damage to the sugarbeets.

* Strike out all but the appropriate designation.  If a partnership, the name of the partnership, if any, and the names of all partners should appear.

3.             Restricted Chemicals.  Grower shall not apply to the sugarbeets, or to the land upon which the sugarbeets are grown, any “pesticide chemical” as defined in the Federal Food, Drug, and Cosmetic Act, as amended, unless a regulation shall then be in effect under Section 408 of such Act exempting such chemical from the requirement of a tolerance or prescribing a tolerance for such chemical, in which event such chemical may be applied to the sugarbeets, or land upon which the sugarbeets are grown, only at such time and in such manner and quantities as shall be within the tolerance prescribed for sugarbeets, and any quantity of such chemical in or on sugarbeets delivered hereunder shall be within the tolerance prescribed in such regulation.  Grower acknowledges and agrees that SSI shall have the right to reject and refuse delivery of any sugarbeets to which have been applied, or which have been grown on land to which has been applied, any unauthorized, non-registered, non-approved or prohibited pesticide, herbicide, chemical or other substance.  Grower further acknowledges and agrees that SSI’s right to reject or refuse delivery of any of said sugarbeets may be invoked by SSI at its sole option, regardless of whether or not use of, or application of, an unauthorized, non-registered, non-approved, or prohibited pesticide, herbicide, chemical or other substance results in, or may result in, a residue in or on the sugarbeets grown, or sugar or by-products produced from such sugarbeets.  Grower warrants that the sugarbeets shall be produced and delivered in compliance with all applicable State and Federal laws and the rules and regulations thereunder, including, but not limited to, Section 12 of the Fair Labor Standards Act relating to the employment of minors.

4.             Sugarbeet Seed.  Grower shall use only such sugarbeet seed as may be jointly approved, in advance, by SSI and the Association.  SSI makes no warranties with respect to approved sugarbeet seed varieties.

5.             Condition of Sugarbeets.  Grower shall deliver the sugarbeets to SSI in good condition at the receiving station designated on the Addendum(s) hereto (which designation may be changed by SSI by notice to Grower near the completion of harvest to avoid an insufficient or uneconomic utilization of a receiving station) properly topped and free from excessive amounts of dirt, stones, leaves, trash or other foreign substances which may interfere with the handling or processing of the sugarbeets.  GROWER SHALL NOT DELIVER AND SSI SHALL NOT BE OBLIGATED TO RECEIVE OR TO PAY FOR AND MAY REJECT (i) sugarbeets not grown, harvested or delivered in compliance with the terms of this Agreement; (ii) sugarbeets of less than 12% sugar content; (iii) sugarbeets of less than 80% purity; (iv) diseased, frozen, freeze damaged, wilted or improperly topped sugarbeets; (v) sugarbeets which are commingled with excessive amounts of dirt, stones, leaves, trash or other foreign substances; or (vi) sugarbeets which for any other reason are not suitable for the manufacture of sugar.  SSI’s failure to reject any sugarbeets shall not constitute a waiver by SSI of, or in any manner impair, SSI’s right to reject any other sugarbeets under this Agreement.

6.             Timing of Deliveries.  Sugarbeets shall be harvested and delivered as and when scheduled by SSI until the beginning of regular harvest (the beginning of regular harvest is hereinafter referred to as the “initial piling date”).  No sugarbeets may be delivered before the initial piling date unless covered by an Early Harvest Amendment between Grower and SSI.  The initial piling date will begin on a date determined by SSI no earlier than September 26, 2003 and no later than October 1, 2003.  On and after the initial piling date, Grower shall harvest and deliver all unharvested sugarbeets as soon as possible without further notification and, unless prevented by weather conditions, shall complete delivery of all sugarbeets by December 1, 2003.  If weather conditions prevent the harvest of all sugarbeets prior to December 1, 2003 and if the Factory is still operating, Grower may deliver during such operating period at such times and places as may be designated by SSI.  After consultation with the Association, SSI may (i) change the initial piling date, (ii) control and restrict deliveries after the initial piling date, or (iii) control and restrict deliveries during any period when warm weather may subject sugarbeets in storage piles to abnormal deterioration.  SSI shall use its best efforts to receive approximately 5% per day (during a normal working day) of all Grower’s estimated total tonnage.  Any requests

2

by Grower for correction and/or changes in delivery tickets must be received by SSI within ten (10) days of the date of delivery of the sugarbeets in order to be considered by SSI.

7.             Late Harvest Payment.  Notwithstanding the provisions of Section 6, Grower may be subject to a late harvest payment in the event Grower fails to complete delivery of all sugarbeets within the twenty (20) harvest days commencing on the initial piling date (the “Regular Harvest Period”) as further provided in this Section 7.

(a)           The late harvest payment shall be assessed against Grower if Grower delivers sugarbeets to a receiving station (outside or factory yard) after the Trigger Time (as defined below) for that receiving station.  The late harvest payment to be assessed to Grower shall be $100 for each hour of operation of that receiving station for the benefit of Grower.  The amount of the late harvest payment shall be deducted from the first payment (and subsequent payments if necessary) to be made by SSI to Grower hereunder.

(b)           The “Trigger Time” shall be the point in time following completion of the Regular Harvest Period that a receiving station has operated for three (3) harvest days following delivery of 95% of the sugarbeets contracted for delivery to that receiving station.  A “harvest day” shall be defined as the normal hours of operation during the Regular Harvest Period for that receiving station.  The actual Trigger Time for purposes of calculating the late harvest payment shall be determined following completion of harvest based on actual deliveries.

(c)           The following terms and conditions shall apply with regard to the determination of the late harvest payment:

(i)            The late harvest payment shall be applied against the Grower’s agreement(s) with respect to which the late deliveries are made.

(ii)           The late harvest payment shall apply for each hour that the receiving station is open for the benefit of the Grower, regardless of the actual hours the Grower is actively harvesting sugarbeets.  Grower will not be charged a late harvest payment for any period that it is not harvesting, provided that Grower has given SSI reasonable advance notice that it will not be harvesting sugarbeets.  The minimum interval for operation of a receiving station will be 8 hours.

(iii)          Grower may avoid the late harvest payment by completing deliveries to another receiving station closer to the factory for which the Trigger Time has not yet been met.

(iv)          If SSI determines that a receiving station is, or is anticipated to be, over its capacity to receive and store sugarbeets, Grower may not be permitted to deliver to that station, at the sole discretion of SSI.

8.             Beet Payment.  Sugarbeets grown, harvested and delivered in accordance with the terms of this Agreement shall be paid for under the following terms:

(a)           A proper deduction for tare will be made by SSI in determining the net tons of sugarbeets delivered by Grower.  The determination of top tare shall be based on the removal of all beet crown material leaving a distinct trace of leaf scar after the top tare is taken.  For beets smaller than or equal to 3” in diameter, removal will be straight across.  For beets larger than 3” in diameter, removal will be down to 22º from the horizontal.  All soil, beet tops, weeds, rocks and other debris found in all samples will be part of the total tare.

3

(b)           SSI shall determine the sugar content of the sugarbeets and the factory cossettes, which determination shall be final.  Grower may have representatives (weighman, tareman and chemist) in SSI’s scale house, tare room and laboratory to check weights, tares and  sugar analyses, but such representatives must be qualified in the line of work to be performed.

(c)           The price per net ton of sugarbeets shall be based on (i) the Average Net Return for Sugar (as defined in paragraph 8(d)) and (ii) the Adjusted Average Sugar Content of Grower’s sugarbeets (as defined and determined under paragraph 8(e)), as set forth in the following scale, subject to increase or decrease for freight charges, early harvest payments, and/or hauling allowance as provided in paragraph 8(g).

SUGARBEET PAYMENT SCALE

(Payment in dollars per net ton of sugarbeets)

Average Net Return for Sugar per CWT	Adjusted Average Sugar Content (%) of Sugarbeets
	19.0%	18.0%	17.0%	16.0%	15.0%	14.0%
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX
XXXX	XXXX	XXXX	XXXX	XXXX	XXXX	XXXX

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

Fractions of Average Net Return for Sugar and Adjusted Average Sugar Content shall be in the same relative proportion and shall be interpolated from the scale.  If the Average Net Return for Sugar or the Adjusted Average Sugar Content is higher or lower than shown in the foregoing scale, the price to be paid for sugarbeets shall be increased or decreased in proportion to the immediately preceding price interval.

(d)           The term Average Net Return for Sugar as used in this Agreement means the net selling price for sugar received by American Crystal Sugar Company from United Sugars Corporation for the 2003 crop year, less all charges and expenditures of the kind regularly and customarily deducted from the net selling price for sugar under SSI’s system of accounting established for determining Average Net Return for Sugar.  Without limiting the generality of the foregoing, there shall be included among the charges and expenditures deductible from the net selling price for sugar in determining Average Net Return for Sugar (i) all excise, sales or other taxes and all other direct or indirect charges of any kind paid or accrued by SSI on, or with respect to, or arising out of the manufacture, processing, production, ownership, possession, holding for sale, sale, marketing or shipment of such sugar or any part thereof, or on all or any part of the return from such sale; (ii) the profit or loss, if any, resulting from hedging operations conducted by SSI in response to sugar customers requests for sugar pricing based on sugar futures contracts listed on the New York Coffee, Sugar & Cocoa Exchange; (iii) the profit or loss, if any, resulting from SSI’s purchase and

4

sale of other domestic or foreign refined sugar which SSI deems necessary or advisable to fill shortfalls in SSI’s production or to preserve SSI’s market share; (iv) all costs incurred in preparing sugar for marketing, including the cost of packaging, liquefying, and powdering; (v) all costs, charges, reductions in revenue, storage fees, and interest expense resulting from SSI’s production of sugar in excess of that permitted to be marketed under government imposed marketing allocations based on the Sidney factory’s percentage of the overall allotment quantity; and (vi) other costs, fees and expenses comparable or similar to those subtracted from the net selling price in calculating the beet payment to the shareholders of American Crystal Sugar Company.

(e)           The Adjusted Average Sugar Content of Grower’s sugarbeets is the average sugar content of Grower’s sugarbeets (as determined by SSI’s individual tests) reduced by a “Pol Adjustment” in an amount equal to 50% of the difference between (1) the average sugar content of all growers’ regular harvest sugarbeets received by SSI for the Sidney Factory (as determined by SSI’s aggregate individual tests) during the current crop year less (2) the average sugar content of all growers’ regular harvest sugarbeets sliced by SSI at the Sidney Factory (as determined by SSI’s cossette tests) during the current crop year.  Steam to the beet slicers will be shut off whenever a sample of cossettes is taken for purposes of the Pol Adjustment.

(f)            The final determination of Average Net Return for Sugar shall be verified by a firm of independent certified public accountants selected by SSI, which verification shall be conclusive.  Grower (acting through the Association) shall have the right to select at its own expense a firm of certified public accountants to check the determination of Average Net Return for Sugar.

(g)           The payment for sugarbeets determined in accordance with paragraph 8(c) shall be increased or decreased as follows:

(i)            In the event Grower delivers sugarbeets to an outside receiving station, Grower shall be charged a freight participation charge (per screened ton) applicable to the transportation of Grower’s sugarbeets from the receiving station to the factory.  The Grower freight participation charge (per net ton) is an amount equal to 50% of the Adjusted Freight Rate.  The Adjusted Freight Rate is calculated by the following formula:

Receiving station	x  100% + Grower’s % tare  x	Weighted average of Grower’s District sugar content  =  Adjusted Freight Rate
Freight Rate	100	Weighted average of Grower’s sugar content

(ii)           In the event Grower delivers sugarbeets to the Sidney factory yard, Grower will be charged a factory freight participation charge (per ton) applicable to the transportation of the Grower’s sugarbeets from the pile to the wet hopper.  The Grower freight charge is an amount equal to 50% of the Actual Factory Freight Cost calculated as follows:

Actual Factory	=	Factory Freight Rate per Screened Ton
Freight Cost		Total Screened Tons Delivered to Factory Yard

(iii)          In the event Grower is contracted to deliver sugarbeets to an outside receiving station and instead elects to deliver sugarbeets to the Sidney factory yard, Grower will be paid a hauling allowance equal to 50% of the Adjusted Freight Rate (determined as set forth above) for the receiving station to which Grower was contracted.

5

(iv)          In the event Grower is contracted to deliver sugarbeets to an outside receiving station and elects to deliver the sugarbeets to an  outside receiving station that is closer to the Sidney Factory, Grower shall be paid a hauling allowance equal to 50% of the freight savings based on the Adjusted Freight Rates for the affected receiving stations.

(v)           In the event Grower delivers sugarbeets to outside receiving stations from certain geographic areas, Grower shall be paid a delivery incentive to compensate Grower for increased hauling expenses.  The delivery incentive shall be calculated as follows:

Pleasant View	Area I (Glendive) Area II (Cracker Box exit to Yellowstone River Area III (Fallon to Yellowstone River) Area IV (Fallon Flats)	$ XXX per ton $ XXX per ton $ XXX per ton $ XXX per ton
Powder River	Area I (Kinsey and Tongue River)	$ XXX per ton
Marley District	These beets will delivered to the Sugar Valley station or optionally to the Factory with hauling allowance.  (Border-the road that runs south of the old Marley station past the church for 2.4 miles.  It then angles west for .6 mile and turns south for 1.4 miles.) Area I (East of border) Area II (West of border)	$ XXX  per ton $ XXX per ton
Culbertson	Area I (East of Brockton, Montana) Area II (All sugarbeet acres grown west of the town of Brockton, Montana)	$ XXX $ XXX per ton

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

(vi)          In the event SSI enters into Early Harvest Amendments with any of its growers that result in SSI making early harvest payments to such growers, the total cumulative amount of such early harvest payments shall be proportionately deducted (on per ton basis) from the payment to be made to all growers, including Grower.

The payment adjustments provided in this paragraph 8(g) shall be applied to the first payment of sugarbeets to be made to Grower under this Agreement.  The determination of contracted receiving station and associated districts shall be based on that specified in the Addendum(s) to this Agreement.

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9.             Payment Schedule.  SSI shall make an initial payment (i) on November 20, 2003 for sugarbeets delivered by Grower prior to November 5, 2003 and (ii) on the 15th day of the month following the month of delivery for sugarbeets delivered by Grower on or after November 5, 2003.  The initial payment will be reduced by the Grower freight participation provided in paragraph 8(c) and any other deductions provided hereunder or otherwise authorized by Grower.  The initial and subsequent payments will be made based on the Adjusted Sugar Content of Grower’s sugarbeets, and SSI’s estimate of anticipated Average Net Return for Sugar as set forth in the following schedule:

Initial Payment		2nd Payment		Final Payment
% of SSI’s estimated net return	Date	% of SSI’s estimated new return	Date	% of actual net return	Date
XXX%	As provided above	XXX%*	April 2, 2004	XXX%*	October 31, 2004

*Taking credit for prior payments

[Portions of this section have been omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.  A copy of this Agreement with this section intact has been filed separately with the Securities and Exchange Commission.]

If Grower is a tenant on the land on which the sugarbeets are grown and Grower and the landlord have a crop sharing agreement, any check issued in payment for sugarbeets delivered by Grower may be made payable jointly, at Grower’s election, to Grower and Grower’s landlord pursuant to forms and procedures prescribed by SSI.  Grower may from time to time request that SSI deduct certain amounts from the payments to be made hereunder to satisfy payment obligations to third parties.  SSI reserves the right to approve the form of such requests.  To the extent SSI elects to honor such request(s), Grower shall defend and indemnify SSI from all losses, costs, and damages (including attorneys’ fees and costs) incurred by SSI as a result of payments to a third party.

10.           Advances to Grower.  Advances by SSI to Grower, either in seed, money, or otherwise, shall constitute payment for sugarbeets purchased hereunder to the extent of such advances and may be deducted from the initial or subsequent payments to Grower; provided, however, in the event Grower abandons his sugarbeet acreage, such advances shall become due and payable immediately.

11.           Dues Deductions.

(a)           SSI at its option may deduct from any payment due under this Agreement (unless notified in writing by Grower before September 1, 2003 not to make such deduction) the Grower’s dues and assessments to the Montana-Dakota Beet Growers Association (the “Association”) and pay this amount to the Association.  No such deduction shall be made unless the Association notifies SSI in writing of the amount of such dues and assessments prior to August 15, 2003.  Grower hereby acknowledges that said deduction may occur.

7

(b)           SSI may at its option deduct from any payment due under this Agreement an amount equivalent to Grower’s proportionate share (determined on a per ton basis) of 50% of the amount paid by or on behalf of SSI to The Sugar Association and/or The American Sugar Alliance.

12.           Research.  SSI is hereby authorized by Grower to deduct from any payment due to Grower the amount of $.01 per net ton of beets purchased and to pay such amount to the SSI/Grower Joint Research Committee Trust - Sidney (the “Sidney Trust”) for the purpose of promoting sugarbeet agronomic research.  SSI shall contribute to the Sidney Trust an equal amount in cash.  Expenditures from the Sidney Trust will be determined by the Research Committee.  The composition of the Research Committee will include equal representation from both SSI and the Association.

13.           Right of Access.  SSI shall have the right to enter Grower’s sugarbeet fields and to take sugarbeet samples from time to time for the purpose of determining the quality and quantity of the sugarbeets.

14.           Force Majeure.  Fire, labor trouble, accident, act of God or of the public enemy, weather or other cause beyond the reasonable control of the parties which prevents Grower from the performance of this Agreement or which prevents SSI from economically utilizing the sugarbeets contracted for in the manufacture of sugar therefrom at the factory shall excuse Grower or SSI, as the case may be, from the performance of this Agreement.

15.           Government Filings.  Grower agrees to make timely filings of all USDA-FSA forms required to ensure maximum eligibility of SSI to qualify sugar for CCC loans in accordance with the Farm Security and Rural Investment Act of 2002 and regulations promulgated thereunder, or other applicable legislation or regulations.

16.           Non-Interference.  This Agreement shall not be construed to affect, modify or in any way interfere with any marketing agreement between Grower and the Association.

17.           Entire Agreement; Assignment.  This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supercedes and replaces any and all prior written and oral agreements between Grower and SSI (and its predecessors).  The printed terms hereof may be modified or waived only by written agreement signed by an officer of SSI.  Grower’s individual performance is contemplated hereby, and Grower shall not assign this Agreement without SSI’s prior written consent.  Grower is an independent contractor and is not an agent or employee of SSI.

18.           Breach Remedies.  Grower agrees to comply with all applicable federal, state and local laws, ordinances, regulations and rulings, as well as SSI’s operational and agricultural regulations and policies (collectively referred to herein as “Applicable Law and Policy”).  Grower acknowledges and agrees that Grower is required, pursuant to this Agreement to grow and deliver the sugarbeet crop to SSI at the times specified by SSI.  Any one or more of the following shall constitute a breach of this Agreement by Grower: (i) the failure of Grower to plant, grow and deliver said crop to SSI; (ii) the failure of Grower to comply with Applicable Law and Policy, (iii) the failure of Grower to comply with any provision of this Agreement, or (iv) the breach by Grower of any other agreement with SSI.  Upon a breach of this Agreement, Grower may be subject to one or more of the following remedies as determined by SSI :

(a)           Termination of this Agreement and the right to deliver sugarbeets to SSI for processing;

(b)           Payment of liquidated damages to SSI for failure to deliver the sugarbeets contemplated under this Agreement, which liquidated damages are hereby declared and stated to be an amount equal to Grower’s share of SSI’s fixed costs (to be determined on a per ton basis) for processing of the crop; and

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(c)           Any other legal or equitable remedy that may be available to SSI under applicable law.

19.           Indemnification.  Grower agrees to hold harmless and indemnify SSI and its officers, directors, owners, shareholders, and affiliates from any and all losses, costs, or damages (including attorneys fees and costs) SSI or its officers, directors, owners, employees, shareholders, or affiliates may incur as a result of Grower (1) delivering sugarbeets to SSI grown from non-approved seed varieties, or to which have been applied, or which have been grown on land upon or to which any unauthorized, non-registered, non-approved or prohibited pesticide, herbicide, chemical or other substance has been applied; or (ii) breaching any provision of this Agreement.  This indemnification obligation shall be in addition to any other remedies that may be available to SSI under Section 18 of this Agreement.

THIS IS A LEGALLY BINDING CONTRACT.  GROWER HAS HAD THE OPPORTUNITY TO CONSULT WITH AN ATTORNEY CONCERNING THE RIGHTS AND OBLIGATIONS SET FORTH HEREIN.

SIDNEY SUGARS INCORPORATED		GROWER
			Print Name
By		Grower E-mail address
	Factory Agricultural Manager
Factory Mailing Address:		By:
P.O. Box 1168
Sidney, Montana  59270		Title:
		By:
		Title:

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EX-99.1

Exhibit 99.1

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, James J. Horvath, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of American Crystal Sugar Company on Form 10-Q for the period ended May 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of American Crystal Sugar Company.

A signed original of this written statement required by Section 906 has been provided to American Crystal Sugar Company and will be retained by American Crystal Sugar Company and furnished to the Securities and Exchange Commission or its staff upon request.

By:	/s/ James J. Horvath
Name:	James J. Horvath
Title:	President and Chief Executive Officer

EX-99.2

Exhibit 99.2

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph J. Talley, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of American Crystal Sugar Company on Form 10-Q for the period ended May 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of American Crystal Sugar Company.

A signed original of this written statement required by Section 906 has been provided to American Crystal Sugar Company and will be retained by American Crystal Sugar Company and furnished to the Securities and Exchange Commission or its staff upon request.

By:	/s/ Joseph J. Talley
Name:		Joseph J. Talley
Title:		Vice President Finance     and Chief Financial Officer